.png)
R&D Funding
In 2000, the UK government introduced R&D Tax Relief to promote innovation in science and technology. This scheme allows eligible companies to receive tax relief worth up to 33% of expenditures incurred in relation to qualifying technical activities.
What is R&D Tax Relief in the UK?
Research and Development (R&D) Tax Relief is a government incentive designed to support companies that work on innovative projects in science and technology. This relief is available to a wide range of companies that seek to advance knowledge or capability in a specific field. The aim is to encourage businesses to invest in research and development by reducing their tax liability or providing cash credits. It is not limited to laboratories or scientists; businesses from various sectors, including manufacturing, architecture and construction, veterinary medicine, and farming, can qualify if they meet the criteria set by HM Revenue and Customs (HMRC).
​
HMRC has a specific definition of R&D for tax purposes. It defines R&D as work that seeks to achieve an advance in science or technology through the resolution of scientific or technological uncertainty.
Types of R&D Tax Relief
SME Research & Development Relief
For small and medium-sized enterprises (SMEs) with fewer than 500 employees and either an annual turnover under €100 million or a balance sheet under €86 million.
This scheme can allow profitable companies to deduct an extra 130% of their qualifying costs from their trading profits which reduces their corporation tax liability. Alternatively, it can allow loss-making companies to claim a cash credit worth up to 14.5% of their trading losses.
Research & Development Expenditure Credit (RDEC)
For larger companies, the RDEC scheme offers a tax credit worth 13% of the qualifying R&D expenditure.
This "above-the-line" credit can be claimed as a cash payment or used to offset a company's tax liability.
Merged Scheme
For accounting periods beginning on or after 1 April 2024, the UK government will be merging the SME and RDEC tax relief schemes into a single, unified R&D tax relief scheme. This new scheme will primarily follow the RDEC rules, providing an "above-the-line" credit at a rate of relief of 20%.
HMRC'S Eligibility Criteria
1
Advancement in Science or Technology
The project must aim to make an advance in the overall knowledge or capability in a field of science or technology, not just within the company.
2
Overcoming Uncertainty
The project must involve overcoming scientific or technological uncertainty that a professional in the field cannot readily resolve.
3
Qualifying Costs
Eligible costs include employee wages, materials, software, utilities, and subcontractor costs directly and indirectly related to the R&D activity.
Common Misconceptions
Large Companies Only
Both SMEs and larger enterprises can benefit from the scheme, with specific provisions tailored to each size category. We have produced claims for companies with a headcount of five employees.
Must be Successful
Projects do not need to be successful to qualify. The focus is on the attempt to resolve uncertainty and achieve innovation.
Only for Scientists
R&D Tax Relief is not exclusive to high-tech industries or scientists. Businesses in fields such as manufacturing, architecture and construction, veterinary medicine, and farming can also qualify.