R&D Tax Relief

The UK R&D Scheme offers a tax deduction against your taxable profits.

Normally all of the work carried out by us will qualify for this tax relief and we can formulate the claim and submit it on your behalf.

Who qualifies 

R&D tax relief can be claimed by companies subject to UK corporation tax and there are two schemes depending on company size:

Small or Medium-sized enterprises (SME) scheme

R&D tax relief can be claimed on 230% of their qualifying revenue expenditure. For profitable companies the relief is around 25%. For loss making companies (likely after the increased deductions under the R&D scheme are claimed) you can sell the tax loss to HMRC for a 14.5% credit. This results in an overall saving of around 33% of the qualifying expenditure.

An SME is defined as less than 500 employees and either an annual turnover of less than EUR 100m or a balance sheet total of less than EUR 86m

Large Company Scheme

The RDEC scheme offers a tax credit of 12% and enables companies to claim back up to 10p (after the deduction of Corporation Tax) for every £1 spent on qualifying research and development (R&D) activities. Unlike the scheme for SMEs, this rate remains the same whether you are profit or loss-making.

Some SMEs also claim R&D tax credits via RDEC for a portion, or all, of their R&D expenditure. This is because the rules for the SME R&D tax credit scheme include some restrictions for grant-funded projects and projects subcontracted to an SME by a large company

What qualifies 

All of the examples of projects given on this website can qualify for R&D relief – particularly those around enhancing an off the shelf product with bespoke add-ons, where existing systems have to be reverse engineered to find out how they work before adding enhancements. This means an add-on to build a bespoke reporting system can actually pay for itself.

But not only our development costs can be claimed – also where your own staff contribute to a project, a portion of their salary can also be claimed.

Example - profitable SME 

  • Business profits £200,000
  • Corporation Tax before R&D claim @ 19% £38,000
  • Business incurred £50,000 of R&D expenditure
Profit before R&D claim      200,000
R&D Enhanced Deduction (50,000 x 130%)  65,000
Revised Profit      135,000
Revised Corporation Tax at 19%      25,650
Corporation Tax Saved (£38,000 –£25,650 = £12,350) i.e. approx. 25% saving      12,350

Example - loss making SME 

  • Business loss £200,000
  • Business incurred £50,000 of R&D expenditure
Loss for the year before R&D claim  200,000
R&D Enhanced Deduction (50,000 x 130%)65,000
Revised Loss for the year  265,000
Maximum losses available to surrender
to HMRC (230% x 50,000 R&D costs)
Maximum Tax Credit Received (115,000 x 14.5%) i.e. approx. 33% saving16,675