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R&D tax reliefAccording to official figures which have been released by HMRC, research and development (R&D) tax credit claims have hit a record high.

 

Data from the 2014/15 financial year shows that claims totaled £1 billion but by 2015/16, this figure had risen to £1.345 billion.

The total number of claims for R&D credits in 2015/16 also rose to 26,225, with SMEs accounting for 21,865 of that figure – up 22% compared to 2014/15.

What is research and development tax relief?

R&D tax relief enables businesses who carry out qualifying R&D in their sector to claim an extra corporation tax deduction for certain qualifying expenditure.

This was the most common way for SMEs to claim R&D tax credits in 2015/16, with 12,700 claims made by small firms attempting to reduce their corporation tax liability.

The level of relief available depends on which scheme a business uses. The relief a small business can get increased to 230% on their qualifying R&D costs under the SME scheme in April 2015. If you’re unsure about any aspects of R&D relief, please don’t hesitate to contact us about our tax planning services.

Larger companies can take advantage of the Research and Development Expenditure Credit (RDEC) scheme, which offers a taxable credit at 11% of qualifying R&D expenditure (rising to 12% from 1 January 2018).

Since the requirement for a minimum R&D expenditure of £10,000 was removed, more businesses now meet the criteria to apply for the R&D tax relief.

Mel Stride, financial secretary to the Treasury, commented:

“From manufacturers to scientists, Britain’s brilliant entrepreneurs are leading the way in technology and innovation. We will continue to support these businesses so they can promote growth across the country and compete in the global economy.”

Who qualifies for R&D tax relief?

Many business owners believe that R&D is reserved exclusively for companies involved in science, technology and pharmaceuticals. Contrary to popular belief however, in the 2014/15 tax year, normal, everyday SMES were responsible for more than four in five R&D claims.

Any business, from a restaurant creating a new recipe or an SME trying to streamline its IT systems by integrating cloud technology, could all be eligible for R&D credits.

 

If you would like more information about research and development tax relief and whether your organisation qualifies, please feel free to contact us about our tax planning services and we will be more than happy to help.

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