R&D Tax Relief: What are the Benefits?
You can make a claim for R&D Tax Relief in your Company Tax Return or amended return backdated for two years from the end of the current relevant Corporation Tax accounting period.
The Small and Medium‐sized Enterprise (SME) Scheme Benefits
- This scheme has higher rates of relief than the Large Company Scheme. From 1 August 2008, the tax relief on allowable R&D costs is 175 per cent - that is, for each £100 of qualifying costs, your company could have the income on which Corporation Tax is paid reduced by an additional £75 on top of the £100 spent. It also includes a payable credit in some circumstances.
- Changes to the rate of relief were announced by the Chancellor in his Budget on 23 March 2011 that, subject to State Aid approval, the rate of SME R&D Tax Relief will increase from 175 per cent to 200 per cent. Once approved, this increase will apply for expenditure from 1 April 2011.
- If your company is claiming under the SME scheme, subject to certain criteria, you may be able to choose to receive a tax credit, by way of a cash sum paid by HM Revenue & Customs (HMRC). You can only get paid a tax credit if your company is a going concern.
- In certain specific situations, even if your company meets the definition of an SME, you may not be able to claim relief under the SME Scheme for certain projects. You may however be able to claim under the Large Company Scheme. This means that you may be able to claim R&D Relief under the SME Scheme for one project and the Large Company Scheme for another.
The Large Company Scheme Benefits
- From 1 April 2008, the tax relief on allowable R&D costs is 130 per cent under the LCS - that is, for each £100 of qualifying costs, your company or organisation could have the income on which Corporation Tax is paid reduced by an additional £30 on top of the £100 spent.