R&D tax relief

R&D tax relief

UK Research and Development – R&D tax relief is one of the most effective and generous tax reliefs in the world. Claiming the government-backed relief can significantly reduce a company’s tax bill and could even result in a tax refund.

However, many companies that are entitled to the relief, do not claim either through lack of awareness or because it seems complex or inappropriate to their business. R&D tax relief is not just for traditional scientific research but also for development work in design and engineering.

What is R&D tax relief?

R&D tax relief rewards companies that invest in innovation, developing new technologies to substantially improve products, processes, devices, materials and/or services.

The requirements are purposefully broad. Whatever size or sector, if your company is taking a risk by attempting to ‘resolve scientific or technological uncertainties’, then you may be carrying out qualifying activity.

All companies, large and small, can claim if they undertake qualifying work, even if they do not pay Corporation Tax because they are unprofitable.

What is it worth?

For accounting periods starting on or after 1 April 2024, most companies now need to claim R&D under the ‘simplified’ merged scheme replacing the SME and RDEC schemes which provided differing rates of relief.

The merged scheme is similar to the previous RDEC scheme in that an above the line credit will be provided at 20% of qualifying expenditure. As this is taxable, the net benefit for a company subject to the main rate of corporation tax will be 15%.

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