Research and development tax relief: What you need to know

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From our experience, there are countless businesses carrying out ground-breaking work currently unaware that they are missing out on tax relief.

Research and development (R&D) tax relief goes untapped by millions of UK businesses each year, in large part because they are unsure of what the process is. Below we take a look at some of the key things you need to know about R&D and how you can use it to further your business.

What is R&D tax relief?

Introduced in 2010, R&D tax relief aims to encourage businesses to invest in research and development within their business that will provide advances in science or technology. This is available to businesses of all sizes, from SMEs through to large corporations.

Tax relief can be claimed on work in science or technology; successful applications will either see a company’s corporation tax liability reduced or provide a repayment to the company. Eligible projects don’t necessarily need to have been successful either, tax relief can still be claimed even when a business has been unsuccessful in their advancements.

What projects are eligible for R&D tax relief?

To qualify for R&D tax relief, a project must be related to a company’s trade. It cannot be related to advancements in social sciences such as economics, or within a theoretical field such as mathematics.

When applying for tax relief, a business must explain how a project demonstrated the following:

  • The project aimed to provide an advance in the field of science or technology
  • The project had some degree of uncertainty
  • The project took steps to try and overcome this uncertainty
  • The advance could not be easily worked out by another in the business’ field

R&D tax relief for SMEs

SMEs with less than 500 staff and a turnover of less than 100 million euros (or a balance sheet total under 86 million euros).

R&D tax relief will allow SMEs to:

  • Deduct an additional 130% of qualifying costs from yearly profits. This is on top of the normal 100% deduction, equalling a 230% deduction overall.
  • Claim tax credit should the company be making a loss (worth up to 14.5% of the surrenderable loss)

Support for R&D tax relief

If you are confident that an upcoming project within your business would qualify you for research and development tax relief, contact our expert team here at Ellis & Co. Chartered Accountants for more information on how we can support your business.

Call us on 01244 345 504 or email info@ellis-uk.com.