R&D tax relief: are you claiming yours?
New statistics released by HMRC show that small and medium sized enterprises (SMEs) are eagerly taking up the benefits of the government’s research and development (R&D) tax relief support. Since its launch in 2000, there have been over 240,000 claims and more than £21 billion of tax relief.
This is not surprising given the benefits available. For every £100 spent on R&D, an SME can claim a whopping £230 of tax deductions. And if the SME has tax losses, it can claim a tax credit in cash from HMRC equal to up to 33% of the amount of R&D expenditure.
The statistics suggest that claims are mainly from companies in London and the South East, reflecting the technology hubs in Cambridge and the Thames Valley. This implies that a lot of companies, particularly those outside London, are not taking up the opportunity.
It’s important to remember that the relief is not restricted to businesses in the technology and digital industry. Many of the claims we have made for clients have not been for technology businesses, but include more mainstream organisations such as architects and manufacturers.
If your company is an SME undergoing R&D that will result in a scientific or technological advance or clarification of an area of scientific or technological uncertainty, you could be eligible for these generous incentives.
If your company has designed products or services which use new technology to substantially improve its existing offering, this too may be within the scope of R&D.
Similarly, new and innovative use of software could also qualify. As long as you can show that your product or service is innovative, cutting edge or a technological advance on what’s currently available, you may gain access to these valuable reliefs.
For these purposes, an SME is a company or group which has:
- less than 500 employees and an annual turnover not exceeding €100 million; or
- gross assets on its balance sheet total not exceeding €86 million.
These are quite high thresholds, so even substantial companies can claim. Groups which are larger than these thresholds can still claim R&D tax relief, but at reduced rates than those available for SMEs.