But I am Not Profitable?

  • There is not longer a minimum R&D spend.
  • You don't have to be paying any PAYE/NI contributions.
  • You do not have to be profitable or paying any tax.
  • See Qualifying Activities section
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How Much Can I Recover?

  • 200%- 230% of R&D Expenditures
  • Upper limit of £7.5 million
  • SME making a loss - Payable Credit up to £33 for Every £100 of Qualifying expenditures
  • SME making a profit - Payable Credit up to £26 for Every £100 of Qualifying expenditures
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What Expenditures Qualify?

  • Staff Engaged in R&D Activities
  • Consumable Materials
  • Externally provided workers
  • Subcontracted activities
  • Computer Software
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Changes as of April 1st, 2011

As of April 1st 2011 the program now allows for a tax relief rate of 200% while reducing other limiting qualifications such as the minimum R&D spend of £10,000 and the requirement for all SME’s to be contributing to PAYE/NIC for employees.

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R&D Tax Credits Overview

R&D Tax Relief is available to SME's to help reduce tax liabilities by more than the actual expenditures on the eligible R&D costs.The programme was created to encourage companies to invest in R&D and to improve the competitiveness of UK companies. This is a very generous programme which is often overlooked by many companies due to the complexity involved with identifying eligible activities. Many companies would be surprised to find out just how many of their ongoing activities qualify for R&D tax relief as defined in this programme. It is understandable that most organizations are not entirely focused on R&D. The tax relief can therefore be applied to any portion of the overall daily activities which falls within the guidelines. This allows for a wide range of industries to take advantage of the scheme.

SME R&D Tax Relief

The basic requirements under this scheme include:

  • < 500 employees
  • Annual turnover not exceeding €100 million
  • Balance sheet not exceeding €86 million

The tax relief rate on eligible R&D is 230%. This means your entire expenditure on R&D activities plus an additional 130% of that expenditure can be claimed. For instance for every £100 of qualifying costs your company could have the income on which the corporation Tax is paid reduced by a total of £230. (£130 on top of the £100 spent).

If your company is not yet realizing a profit but instead posted a trading loss you can be eligible for 130% of the qualifying R&D expenditures which can be carried forward as a loss.

Another option for those companies not yet making a profit, is to convert the R&D expenditures to tax credits essentially providing a cash sum paid to your company by HMRC. This is a very attractive option for young growing companies as an alternative to external investment especially when the key concern is to maintain as much of the company equity with the original founders and shareholders. If this option is taken PAYE and NIC contribution must have been made in the period in which you are making a claim. Of note is that these liabilities include all directly employed staff and is not limited to those involved in the R&D activities.

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