What are R&D Tax Credits?

Research and Development (R&D) Tax Credits are a tax incentive designed to encourage UK companies to invest in innovation.

For small and medium enterprises (SMEs), R&D is a Corporation Tax (CT) tax relief that can reduce a company's tax bill if liable for CT, or can result in a payable tax credit.

For large companies, the incentive is called Research and Development Expenditure Credit (RDEC), which is an above the line credit, and can either reduce their tax bill or allow them to claim payable cash credits.

R&D Tax Credits Explained

The UK’s Research & Development (R&D) tax relief schemes offer generous tax incentives. We are here to make the process of claiming as easy and hassle-free as possible, while also helping to maximise the benefits of the scheme. Our aim is to help you claim the greatest possible relief.

R&D for Tax Purposes – Not Just Scientists in White Coats

The R&D tax relief schemes are remarkably inclusive and designed to be applicable across any sector. The definition of R&D for tax purposes is actually much broader than you might think. It's quite likely that some of the challenges that you face on your business projects could qualify as eligible expenditure.

The rules and guidelines governing this niche area of tax are complex. By working with Ayming, we will identify any activity qualifying for relief. This is thanks to our team's in-depth understanding of these complexities, combined with their own industry-specific expertise. It's this combination of tax and technical knowledge which is integral to maximising our clients' R&D tax claims.

Which scheme should I choose & how much can I claim back?

SME R&D Tax Credits explained:

If your business qualifies as an SME under the R&D tax legislation you could claim back up to 33p in every £1 of qualifying expenditure as a loss-making entity. Instead you could claim up to 26p in every £1 of qualifying expenditure if you’re making a profit. This could be realised as relief on your payable corporation tax, or in some instances as a cash credit from HRMC.

Not sure what qualifies as an SME? Check the definition in the R&D Tax for SME infographic below. Click image to enlarge...

R&D Tax Credits explained

Large Company R&D Tax Credits explained:

If your business falls into the Large Company categorisation, you will claim under the R&D Expenditure Credit scheme (RDEC). This scheme gives back up to 8.8p for every £1 of eligible expenditure before 1st January 2018, and 9.7p for every £1 of eligible expenditure afterwards. You may have also heard of the R&D Tax Relief scheme for Large Companies, but for expenditure incurred after 1st April 2016 all Large Company businesses must claim under this RDEC scheme.

Not sure what qualifies as a large company? Check the R&D Tax for Large Companies infographic below.

R&D Tax Credits explained

R&D Capital Allowances (RDAs) explained

R&D Capital Allowances (“RDAs”) allow you to claim a 100% first year allowance on R&D capital expenditure. This is significantly more generous that most other types of capital allowance.

If you are carrying out qualifying R&D activities, it is likely that you have incurred some capital expenditure which would qualify for RDAs.

R&D Allowances are based on the same definition of R&D as the R&D tax credits schemes. We recommend that you review your eligibility for R&D Allowances in conjunction with the R&D tax schemes.

R&D tax credits explained?

We hope you’ve got a clearer idea of what R&D tax credits are now you’ve read this far. We speak to companies every single day. Many of them don’t believe the R&D tax credits schemes apply to them. In reality, R&D for tax purposes covers a much broader range of activities than you might think. The scheme’s rules and guidelines are designed to be applicable to all industries.

If you’re still not sure what qualifies for R&D tax credits, or if you’re just not sure if you’re claiming everything you’re entitled to, then contact us today. With over £150m of R&D tax credits claimed for our UK clients, we’re well placed to guide you through this niche area of tax. We work with companies of all shapes and sizes, and across a wide variety of industries, to ensure their business enjoys the maximum financial rewards.