The SME R&D tax credit scheme has supported innovation in UK businesses for over two decades. It allows eligible companies to claim a significant proportion of their R&D costs as a tax credit or cash benefit, depending on their profitability.
Note: While the SME scheme is closed to new accounting periods from 1st April 2024, it remains active for historic claims. Businesses can still submit claims under the SME rules for the two most recently completed accounting periods.
Most companies now claim under the merged R&D tax relief scheme, which is based on the Research and Development Expenditure Credit (RDEC) model. R&D-intensive SMEs may qualify for additional support through the Enhanced R&D Intensive Support (ERIS) route within this merged scheme.
If you’re unsure how the changes affect your business, our team can help you navigate both past and current claim routes.
In this article
- How did the SME R&D tax credit scheme work?
- What costs could be claimed under the SME scheme?
- Who was eligible for SME R&D tax credits?
- How we can help
How did the SME R&D tax credit scheme work?
Before April 2024, qualifying companies could claim R&D tax relief under the SME scheme for a wide range of innovation activities.
To be eligible, a project needed to achieve an advance in a field of science or technology through the resolution of a scientific or technological uncertainty. HMRC’s definition was intentionally broad, supporting claims across sectors like software, manufacturing, life sciences, construction, and more.
While the SME scheme is no longer open for new accounting periods, the same fundamental criteria apply under the new R&D tax relief structure.
We can help you determine which scheme your claim falls under.
What costs could be claimed under the SME scheme?
The SME scheme allowed companies to claim a portion of their eligible R&D spend, including:
- Staff time
- Subcontractors and externally provided workers
- Software licences
- Cloud computing and datasets
- Consumables and materials
- Pure mathematics
Claims were submitted as part of a company’s Corporation Tax return, with technical and financial evidence. On average, payment was received within 48 days of submission
Who was eligible for SME R&D tax credits?
To qualify under the SME scheme, companies had to meet the UK definition of a small or medium-sized enterprise:
- Fewer than 500 employees
- Either less than €100 million in turnover or less than €86 million in gross assets
Businesses also needed to:
- Be liable for UK Corporation Tax
- Ensure R&D costs were revenue in nature
- Not have received notifiable state aid (such as certain grants) for the same project
Expertise
How we can help
Whether you’re looking to submit a claim under the SME scheme for a past accounting period or understand how the new rules apply going forward, our team can help. We combine deep tax knowledge with sector-specific expertise to maximise your benefit and reduce the burden on your team.
From eligibility assessment through to submission and HMRC enquiry support, we’ve got you covered – be it under the legacy SME scheme, the merged R&D scheme (based on the RDEC model), or the ERIS route for qualifying SMEs.
Recover valuable cash by claiming tax relief on eligible innovation and development activities.
Submit claims in 1 week to unlock R&D tax relief sooner and boost cash flow.
Rely on expert support to navigate your HMRC enquiry, protect your claim, and ensure compliance.
What schemes are available to me?