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Qualifying for R&D incentives

As a UK business, there are a few simple criteria that you must meet in order to claim R&D incentives.

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First and foremost, will you be classified as an SME or a Large Company?

SME Definition

R&D incentives for SMEs come in the form of a Corporation Tax (CT) relief or tax credit. A business wishing to claim under these schemes must have:

  • Less than 500 employees
  • AND
  • EITHER an annual turnover of less than €100 million OR a balance sheet of less than €86 million

Large Company Definition

When it comes to the Large Company definition for R&D tax purposes, it’s much simpler. In a nutshell, if you don’t fit the SME criteria above then you are categorised as a Large Company, and therefore would need to apply under the Research and Development Expenditure Credit (RDEC) scheme.

R&D incentives criteria

Once you know which R&D incentive scheme you will qualify for, you just need to check that your business fulfils all the points in the relevant checklist below.

SME eligibility criteria

  • Company within the charge to UK corporation tax
  • Going concern
  • Company is a Small or Medium Enterprise
  • Trade to which R&D relates
  • R&D has not been contracted to the company
  • Expenditure is revenue in nature for tax purposes and deductible in the period
  • No grants or subsidies have been received in respect of the expenditure

Large Company eligibility criteria

  • Company within the charge to UK corporation tax
  • Going concern (for R&DEC)
  • Trade to which R&D relates
  • Expenditure is revenue in nature for tax purposes and deductible in the period
  • R&D has not been contracted to the company by an SME

R&D Incentives explained