Understanding R&D Tax Credits

What are R&D Tax Credits?

Research and development (R&D) tax credits are a UK government tax relief that rewards companies who invest in innovation. Companies that develop new products, process or services or enhance pre-existing ones are eligible for a cash payment and/or a Corporation Tax reduction. R&D Tax Credits can either complement or act as an alternative to innovation grants and are accessible to companies of all sizes and sectors.

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What counts as research and development (R&D)

No matter your company size, revenue or sector, If your company is attempting to ‘resolve scientific or technological uncertainties’ then you may be carrying out qualifying activity.  Examples of R&D might include creating new products, processes or services or modifying existing products, services or processes.

It’s important to note that R&D doesn’t have to be successful to qualify for R&D tax credits. You can also claim for work undertaken on behalf of a client as well as your own projects.

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Which business expenses qualify for R&D tax relief

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If you’re an SME

The majority of companies in the UK fall into the SME category including startups. SME’s can claim back up to 33p for every £1 spent on R&D, receiving a cash benefit regardless of whether your business is loss-making. The average claim in the UK for an SME in 2015-2016 was £61,514

If you’re a large company

For companies with over 500 people or a turnover of €100 million turnover and €86 in Gross assets, there is the ability to claim 10p for every £! spent on R&D – even if they are loss-making. The average claim make by large companies in the UK was £348,916 in 2015-2016

R&D in your industry