How is it Calculated?

How is R&D Tax Relief Calculated?

The process of claiming research and development (R&D) tax relief can be complex. But with nearly £4 billion awarded each year, it is well worth the time and the effort to find out whether you qualify.

The amount of tax relief available under the scheme depends on the size of your business. Small to medium-sized enterprises (SMEs) apply through a different scheme to larger businesses, with different calculations for each.

SME or RDEC?

SMEs with fewer than 500 staff and a turnover of less than €100 million (or a balance sheet total under €86 million) qualify for SME R&D Relief.

This allows companies to deduct up to 130% of their qualifying costs from the year’s profits, in addition to the usual 100% reduction.

Companies that are too large to meet the SME criteria can still make a claim for a Research and Development Expenditure Credit (RDEC), worth 12% of qualifying costs. This is offset against your tax liability, although it can be payable as cash in some circumstances.

Some R&D expenditure is obvious, but you may not be aware of all the costs that can qualify for tax credits. R&D Tax Shop can help identify and review the costs associated with your project, as it is important to submit an accurate claim.

Ineligible costs include the wages of support staff who would be employed regardless, and the cost of any patents or trademarks used to protect the outcome of the R&D.

• Wages and pensions for staff directly working on the R&D project

• Subcontractor and freelance wages

• Consumables such as water, fuel and power used in the R&D process

• Software specifically used for the R&D project

• Payments to clinical trial volunteers

• The cost of designing and constructing prototypes to test your R&D

GET A CALL BACK

If you need to speak to us about a general query fill in the form below and we will call you back within the same working day.

News and Insights

  • 1
  • Jul
Claiming Capital Allowances for Commercial Property – the complexities advisors face

Capital Allowances (CA) are the hidden gem of UK corporation tax, providing a vital opportunity to offset some of the costs of a business. Although many tax advisors and accountants dealing with busin…

  • 21
  • May
R&D Tax Credits & COVID-19 support routes: what businesses need to know

Thousands of businesses are in the process of receiving generous relief from HMRC’s research and development (R&D) tax credit scheme right now – a welcome source of funding for many in thi…