Research and Development Tax Credits
Too many people
85% of SMEs don't realize they qualify for R&D tax credits, including the RDEC scheme, and are therefore missing out by not claiming the SME tax relief available to them. So far, 119 million successful claims have been submitted. DON'T be among those that could have claimed but didn't.
Background
In 2000, the government introduced the RDEC scheme to encourage scientific and technological innovation within the United Kingdom. This initiative, along with R&D tax credits, is designed to provide assistance to companies engaged in research and development activities. R&D tax credits can offer Corporation Tax (CT) relief that may lower your company’s tax bill if it is liable for CT. In some circumstances, you may even receive a payable tax credit, making it a valuable option for businesses seeking SME tax relief.
Research and Development Tax Credits
R&D tax credits provide companies engaged in qualifying research and development activities related to their trade the opportunity to claim an additional corporation tax (CT) deduction for specific qualifying expenditures. The amount of relief accessible varies depending on the scheme utilized by the company.
The SME tax relief scheme, effective from 1 April 2015, allows companies to benefit from increased relief, now at 230% of their qualifying R&D costs. Additionally, loss-making companies may, under certain conditions, surrender their losses in exchange for a payable tax credit.
Under the RDEC scheme, also launched on 1 April 2015, eligible companies can access a taxable credit amounting to 11% of their qualifying R&D expenditure. For those that are loss-making, this tax credit is fully payable, subject to specific restrictions.
Key features of the RDEC scheme indicate that companies with no CT liability can benefit from the R&D tax credits through a cash payment or a reduction in other taxes or duties due. The payable credit is capped at the company’s PAYE/NIC liabilities for the staff involved in qualifying R&D activities during the accounting period. Furthermore, SMEs can take advantage of the RDEC scheme if they engage in subcontracted or subsidised research. Companies belonging to groups can also surrender the RDEC against the CT liability of another group company.
For assistance and expertise in navigating these schemes, our preferred supplier is John Challen of Catax, reachable at 0203 393 2204 or 07876 555166 and via email at John.Challen@catax.com.
For more information, please visit https://catax.com/research-development/what-is-research-and-development-tax-credit/.
