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Research & development tax relief

Many SMEs, particularly those in the tech industry, or spin-outs from academia, have to invest in Research and Development (R&D) to keep ahead of the competition. Nonetheless, R&D is found across many industries and there are SMEs who are unaware that the work they carry out actually constitutes R&D.

R&D tax credits are a valued government incentive to boost spending on innovation, and a great way of supplementing or substituting R&D funding grants. Both profitable and loss-making small and medium enterprises (SMEs) can recover up to 33p in every £1 they spend on qualifying R&D.

The SME tax relief scheme applies to businesses employing up to 500 full time staff and with an income of less than €100m or balance sheet assets of less than €86m. Under this scheme, profitable SMEs can expect to see a reduction in their corporation tax bills, whilst loss-making SMEs can opt to ‘surrender’ their trading loss on qualifying R&D expenditure to retrieve a cash credit from HMRC.

Larger businesses with over 500 full time staff, will fall under a different scheme with different rules - Research & Development Expenditure Credit (RDEC) scheme.

The R&D tax credit claim process is complex, firstly you’ll need to identify precisely which expenditure qualifies for R&D tax relief and then prepare the necessary calculations and supporting narrative for submission to HMRC. Wise & Co can take care of the entire process for you, liaising with HMRC on your behalf and working with you to maximise the benefits of the claim.

Since the introduction of the valuable R&D tax relief, Wise & Co’s Corporation Tax team has been fundamental to the success of many claims for a variety of clients.

Further reading:

If you’re an SME and wish to find out more about the categories of qualifying R&D expenditure, read our Tax facts: Research & Development: Small and Medium Enterprises

To get in touch with one of our team please contact us on 01252 711244

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