Overview

R&D is a Corporation Tax (CT) tax relief that may reduce your company’s tax bill. This tax relief can only be claimed if your company is liable for CT. The way you claim tax relief depends on the size of your company.

A small or medium sized enterprise (SME) is a company with less than 500 employees with either:

  • an annual turnover under €100 million
  • a balance sheet under €86 million

Your company isn’t an SME if it’s part of a larger enterprise that, when taken as a whole, would fail these tests. Further details regarding the definition, for the scheme’s purposes can be found here. For larger companies, a claim for R&D tax credits can still be made, with further information being found here.

What is considered R&D?

R&D for tax purposes takes place when a project seeks to achieve an advance in science or technology.

The activities that directly contribute to achieving this advance in science or technology through the resolution of scientific or technological uncertainty are R&D. However, certain qualifying indirect activities related to the project are also R&D so we recommend you read the further definition details here.

Rate of tax relief

From April 2015, the tax relief on allowable R&D costs is 230%.

This means that for every £100 of qualifying costs, your company could reduce your CT by an additional £130 on top of the £100 spent.

If your company makes a loss, you can choose to receive R&D tax credits instead of carrying forward a loss. It’s a cash sum paid to you by HMRC – if your company has PAYE and National Insurance contributions liabilities for the same period.

How to see if you’re eligible and make a claim

There are specialist HMRC units able to help with your claim. Contact details for the local HMRC unit can be found on the right hand side of this page.

There will also be other specialist organisations, such as your accountant or a R&D Tax Credit consultancy or your accountant, who offer paid for support to calculate the amount of R&D tax relief you may be eligible for.

HMRC also has a free pre-recorded webinar giving a basic overview and introduction to R&D tax credits and the Patent Box, and explains who is eligible to claim, how to make a claim and where to get further help and advice for your business.

230% tax relief on allowable R&D costs

Cash lump sum