Research & Development tax relief

In April 2000 Research & Development tax relief was introduced for Small and Medium-sized Enterprises.

For Large Companies, the Research and Development Expenditure Credit (RDEC) was introduced in April 2013 and has now replaced the previously existing Large scheme.

The relief is processed through the corporation tax system and can be claimed by companies that are undertaking qualifying research and development (R&D).

How does R&D tax relief work?

R&D tax relief for SMEs works by enhancing qualifying expenditure which gives the company an additional deduction. This additional deduction will either reduce a company’s taxable profit or create or extend a loss.

Subject to certain rules, HMRC allows the loss not exceeding the qualifying expenditure and the enhancement to be surrendered for a payable tax credit.

Therefore, by claiming R&D tax relief, a company will either reduce their Corporation Tax liability or receive a payable tax credit.

For large companies, the RDEC scheme allows a taxable credit at a rate of 13%. For loss making companies the tax credit is fully payable subject to certain restrictions.

You can find out more about R&D tax relief and whether your company is eligible to claim it by visiting SME R&D