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What R&D Tax Relief Can I Claim?

Determining which R&D tax relief applies to your business is paramount. Claiming the incorrect relief will result in two outcomes:

1. Your claim will be too small, resulting in you missing out on money that you are fully entitled to, or

2. Your claim will be larger than it should be, creating the real possibility of an HMRC enquiry and chargeable penalties.

But no need to worry! Our team at LimestoneGrey are here to help you unjumble the jargon and build your R&D tax credit claim using the right treatment. We are able to use our expertise to ensure that your claim is prepared correctly.

The SME Research & Development Tax Relief

For accounting periods starting on or before 31 March 2024

The SME R&D Tax Relief scheme offers support to small and medium-sized enterprises (SMEs), enabling them to reclaim up to 33% of their research and development expenditure, either as a payable tax credit, a tax reduction, or even a combination of the two.

The Research and Development Expenditure Credit (RDEC)

For accounting periods starting on or before 31 March 2024

The Research and Development Expenditure Credit (RDEC) is tailored for larger companies subject to UK corporation tax, offering them the ability to claim tax relief of up to 20p* for every £1 invested in eligible research and development activities.

New Merged Scheme

For accounting periods starting on or after 1 April 2024

The newly introduced Merged Scheme is accessible to companies of any size, regardless of their employee count or turnover. This scheme allows businesses to recover up to 20%* for each £1 invested in eligible R&D activities. The benefit of the scheme is that it removes the complexity around grants and subsidies, allowing companies to still claim up to 20%* despite already receiving another form of financial assistance.

R&D Intensive SME Relief

For expenditure incurred on or after 1 April 2023

Companies deeply invested in research and development can benefit from the R&D Intensive Scheme. Eligibility for this scheme requires that a company’s expenditure on R&D constitutes a minimum of 40% of its total costs (lowering to 30% for accounting periods starting on or after 1 April 2024). Qualifying businesses can claim back up to 27% of their R&D expenses. To be eligible for this relief, you must be an SME and your business must be loss making.

 

*RDEC and Merged Scheme are taxable income, up to 20p for every £1 relates to the amount before the deduction of tax.

SMEs will need to claim RDEC relief under particular circumstances, for example, if they have been subcontracted to complete research and development work by a large company or they have received a certain government grant. LimestoneGrey will be able to clearly identify your company’s position, ensuring that your business is claiming the correct relief.

Is my Business a SME or a large Company?

For accounting periods beginning on or before March 31, 2024, it’s crucial for your business to determine whether it qualifies as an SME or a large company to correctly identify the applicable relief. To do this, we initially need to examine three key aspects of your business:

1. Gross Assets

2. Staff numbers

3. Turnover