Research and Development (R&D) tax credits are a tax incentive brought about by the UK Government. These credits were introduced to encourage companies to invest in R&D.
Tax credits can be used to reduce your tax bill or claim payable cash credits as a proportion of your R&D expenditure. If your business carries out research and development then you may well be eligible for R&D tax credits – which can save your business money.
There is a common misconception associated with R&D tax credits; eligibility isn’t relegated to companies with high-tech research labs full of people in white coats. In fact, any company that spends money trying to improve a product or service through innovation and technological advances using qualified staff and appropriate project controls are likely to be eligible.
There are different schemes available, each tailored to different business types:
The SME Scheme – This scheme is for companies with less than 500 Full-time equivalent (FTE) staff. The company must satisfy at least one of the following criteria: revenue less than €100m or balance sheet assets less than €86m. Under this scheme, the level of tax relief can be as much as 230%. In addition to this, loss making SMEs have the option to surrender some of their losses for a payable cash credit from HMRC.
The Large Company Scheme – This scheme is for companies with over 500 FTE staff, or with revenue greater than €100m and balance sheet assets greater than €86m. The rates for R&D tax relief for large companies is currently 130%.
Still unsure as to whether or not you’re eligible, or just need help applying? Contact us today.
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