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Are you making full use of the generous R&D relief scheme?
07 March 2019

Hundreds of businesses across the UK enjoy tax relief totalling millions of pounds thanks to the Government’s generous R&D relief scheme.

Last year nearly 40,000 claims were made for Research and Development (R&D) tax credits in the UK, almost double the amount made in the previous year.

Businesses both large and small benefited from £3.5 billion in tax relief during the same period in 2018 from the often-neglected tax credit, which helped contribute towards £24.9 billion of R&D expenditure across the nation.

However, many more businesses are potentially missing out.

Many smaller businesses can benefit from the small and medium-sized enterprise (SME) R&D relief, which is available to businesses with fewer than 500 staff or a turnover below £87 million.

This allows small businesses to deduct an extra 130 per cent of their qualifying R&D costs from their yearly profits, as well as the normal 100 per cent deduction, to make a total 230 per cent deduction – which equates to an additional 33p for every £1 spent on R&D.

However, businesses that want to take advantage of this need to meet certain eligibility criteria.

In order for a project to be eligible for R&D relief, it must have involved a search for an advance in science and technology or tried to overcome uncertainty using a method or procedure which couldn’t be easily worked out by a professional in the field.

Larger businesses can also benefit from Research and Development Expenditure Credit, which is worth 12 per cent of a company’s qualifying R&D expenditure and is offset against a person’s tax liability or, in some circumstances, is payable in cash.

The credit is taxable at the normal Corporation Tax rate, which effectively means the benefit is worth 10p for every £1 you spend on qualifying R&D.

Naturally, the rules surrounding all types of R&D tax credits are complex and some businesses may find the criteria governing what is and is not eligible confusing.

With this in mind, it is always wise for firms to seek specialist advice, as it may be possible to obtain confirmation of the relief prior to major investment in a project.

Link: Research and Development (R&D) tax reliefs

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