The inside guide to R&D tax relief

Whilst many businesses might think that R&D tax relief doesn’t apply to them, the truth is that many are eligible to benefit from it - and they are missing out on hundreds-upon-thousands of pounds each year.

Incentivising businesses to become more innovative  

R&D tax credits are a form of tax relief introduced by the Government in 2000 to encourage research and development amongst UK businesses as a means to reward this innovation.

The UK has one of the most generous schemes around, with an estimated £6 billion per annum available to SMEs alone.

There are two schemes in place, one for SMEs and the other, for large businesses.

  • SMEs can benefit from an enhanced deduction of 130% up until 1st April 2023
  • From 1st April, the rate available for qualified SME expenditure is being reduced to 86%
  • Where the qualifying expenditure creates a loss, SMEs can claim a cash tax credit of 14.5% up until the 31st March 2023. After this date, the rate is will be reduced to 10%. 

Other changes will be coming into force from the 1st April 2023. 

Major Changes to R&D Rules from April 2023

As you will know, in the Autumn Statement 2022 Chancellor Jeremy Hunt announced changes to R&D Tax Credits for UK businesses, affecting both SMEs and large organisations from April 2023. The changes to R&D Tax  Credits reflect a shift in strategy from the Treasury for investment in UK innovation.

Learn More

R&D expenditure credit (RDEC) Scheme 

Currently larger businesses can claim a 13% credit of their qualifying R&D expenditure, however this rate is increasing to 20%.

Whether you’re an SME or a large business and are spending money on Research and Development, you could be entitled to receive a reduced tax bill, or even a cash repayment.

Is my business eligible for R&D tax relief?

Not sure whether or not you qualify to receive a slice of these generous R&D tax incentives? Ask yourself:  

  • Have you developed your own software, IT solutions or products?
  • Do you manufacture products?
  • Have you improved or sought to improve your processes or the efficiency of your services?
  • Do you regularly change the way you make your products?
  • Have you tried to resolve technical product or process challenges?

If you’ve answered ‘yes’ to any of these questions, then you could qualify.

How do I know what I can claim?

R&D for tax purposes covers a much broader range of activities than you might think and is applicable to all industries. 

Knowing what you can and cannot claim can be somewhat of a minefield. We have worked alongside numerous businesses to successfully claim tax relief, from the following sectors to name but a few, and would welcome the opportunity to help you assess the eligibility of your claim.

  • Telecommunications
  • IT
  • Marketing & Event Management
  • Manufacturing
  • Aviation
  • Construction

What about projects that have stalled?

They may still count. R&D tax relief also applies to activities, projects and internal processes that didn’t initially work out quite how you wanted them to.

Do my ideas count?

Yes. Any time spent discussing or developing your next big idea and the subsequent costs can be eligible for tax relief, even if you didn’t finish what you set out to achieve. 

What about if I haven’t got the time or expertise to sort my claim?

We can help. One of our experts will have a free initial discussion with you to generally assess your eligibility and see whether you could also benefit from other tax breaks such as Patent Box.