Tax Credit

Are you investing in R&D in the UK?
You may be able to claim for tax relief via the R&D tax credits scheme.

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UK R&D Tax Credits

Companies are currently able to claim tax credits for their Research & Development in the UK via two routes, both administered by HMRC. These UK government incentives are designed to encourage innovation by rewarding businesses who work to improve or overcome challenges and uncertainties in their products and processes.

One route is for small and medium size businesses (SMB), the ‘SME R&D tax credit scheme’ (in the UK SME stands for small and medium enterprises). Whilst for larger companies it’s the ‘Research and Development Expenditure Credit (RDEC)’.

Which UK R&D Tax Credits
Scheme is Right for Me?

Usually it is the size of your business that decides which scheme to use, but there are other factors that need to be taken into account so it’s important to get specialist advice.

What is the Value of R&D Tax Credits in the UK?

The calculation for SMBs means that companies could claim back up to 33% of the amount they spent on qualifying R&D, however for expenditure on or after  April 1, 2023, the rates will be lowered. From that date, the maximum will be 18.6% for companies with revenue loss, or up to 27% if the company is R&D intensive. For tax purposes, an R&D intensive SMB has qualifying expenditure which represents 40% or more of their total expenditure.

For SMBs the enhancement rate for R&D expenditure on or after April 1, 2023 will be 86% (reduced from 130%) and the tax credit rate reduced to 10% (from 14.5%). R&D intensive companies can still claim a tax credit at 14.5%.

For companies who claim under the RDEC scheme the expenditure incurred on or after April 1, 2023 will increase from 10% of their R&D spending refunded up to a rate up of 15%.


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R&D Tax Credits for SMBs

In the UK, the ‘SME R&D tax credit scheme’ means you can currently claim tax relief of up to 33% on your qualifying R&D expenditure incurred up to March 31, 2023. After that date, new rates will apply.

A company is classed as an SME for the purposes of R&D tax credits if they employ fewer than 500 employees and have, either an annual turnover under €100 million or a balance sheet under €86 million.

The UK Research and Development Expenditure Credit (RDEC)

The increases to the RDEC rate over recent years means that now companies can get over 10% of their R&D expenditure incurred up to March 31,2023, refunded. For expenditure after this date the R&D tax credit calculation will increase the tax refund up to 15%.

Do You Think You Could be Eligible
for R&D Tax Credits in the UK?

Your business may be eligible for R&D tax credit in the UK if you:

Which Expenditures Qualify for R&D Tax Credits in the UK?

R&D is said to take place, for tax purposes, when a project seeks to achieve an advance in overall knowledge or capability, in a field of science or technology.

You may be able to claim UK R&D tax credits against costs incurred on your R&D project including:

Further R&D related expenditure will also be allowable for full accounting periods starting on or after  April 1,2023.

How are R&D Tax Credits Paid in the UK?

If your company is liable for corporation tax, then R&D tax relief may reduce your company’s tax bill.  Or alternatively if you make a loss, you could surrender this loss and claim a tax credit. The R&D schemes mean that companies with no corporation tax liability can benefit through a cash payment or a reduction of tax.

R&D tax credit handshake

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