Speak to our expert team today to find out more about R&D tax credits.
R&D tax credits explained
R&D tax relief is a Corporation Tax relief that may reduce your company’s tax bill or result in a payable tax credit.
Depending on the size and profitability of your company, and the accounting period for which you are claiming, you could receive a benefit of up to 27% of your qualifying R&D expenditure across relevant projects. This relief can help fund future innovation, reducing the risk associated with producing new products and processes.
In recent times, R&D tax incentives have undergone significant change. Don’t be put off by perceived complexity and additional risk relating to the new framework. With the right specialist partner and tailored support, your business could enjoy far-reaching benefits, in addition to those generated for the wider economy and society. At ForrestBrown, we take a rigorous approach to delivering R&D claims based on the latest guidance from HMRC.
Here's everything you need to know about R&D tax credits, and how you can secure the funding your innovation deserves.
What are R&D tax credits?
Research and development (R&D) tax credits are a government incentive designed to reward UK companies for investing in innovation. They are a valuable source of funding for businesses to invest in accelerating their R&D, hiring new staff and ultimately growing.
How do they work?
Companies that spend money developing new products, processes or services, or enhancing existing ones, could be eligible for R&D tax relief. If you’re investing in innovation, you may be eligible to make an R&D tax credit claim to receive either a cash payment and/or Corporation Tax reduction.
Is my business eligible for R&D tax credits?
To benefit from R&D tax incentives, you must:
- Be a limited company in the UK that is subject to Corporation Tax.
- Have carried out qualifying research and development activities.
- Have spent money on these projects.
Who qualifies?
UK companies working on innovative projects in science and technology could be eligible to claim R&D tax relief.
R&D takes place in a wide range of industries. Manufacturing, Information and Communication, and Professional, Scientific and Technical are the top three sectors for R&D tax credit claims.
It is unlikely that you will be eligible if your activity is not recognised as a scientific or technological innovation. You cannot claim if the advance is in the arts, humanities or social sciences (including economics).
HMRC also provides information on the types of claim which are rarely eligible, including those from care homes, childcare providers, personal trainers, wholesalers and retailers, pubs and restaurants.
Does your business qualify?
Contact us to find out if your business qualifies for R&D tax credits.
- Telephone
- 0117 926 9022
- hello@forrestbrown.co.uk
What counts as R&D?
If your company is taking a risk by attempting to resolve scientific or technological uncertainties then you may be carrying out qualifying activity. This could include:
Within the government’s accepted research and development definition, R&D doesn’t have to have been successful to qualify. Further detail is available in our KnowledgeBank article: How do I know if I’m carrying out qualifying R&D?
What costs qualify for R&D tax credits?
Where qualifying activity is being undertaken, certain costs may qualify for R&D tax relief. They fall into the following categories:
- Staff, including salaries, employer’s NIC, pension contributions and reimbursed expenses.
- Subcontractors and freelancers.
- Materials and consumables including heat, light and power that are used up or transformed by the R&D process.
- Software licences and certain data and cloud costs.
- Payments to the subjects of clinical trials.
Read our article for more on what qualifies for R&D tax credits >
What R&D incentive is right for my business?
For accounting periods beginning on or after 1 April 2024, all companies will claim under a merged scheme – with the exception of R&D intensive loss-making SMEs qualifying for enhanced R&D intensive support (ERIS).
R&D tax credit rates
R&D tax credits are calculated based on your R&D spend in relation to your qualifying activity. Depending on what incentive you’re claiming under, the rates of relief can vary as shown in the table below.
| SME R&D tax incentive | RDEC | Merged scheme | Enhanced R&D intensive support | |||
|---|---|---|---|---|---|---|
| Company type | Before 1 April 2023 | After 1 April 2023 | Before 1 April 2023 | From 1 April 2023 | From 1 April 2024 | From 1 April 2024 |
| Loss-making SME | Up to 33.35% | Up to 18.6% | 10.5% | 15% | 16.2% | |
| Profit-making SME | Up to 24.7% | Up to 21.5% | 10.5% | Up to 16.2% | Up to 16.2% | |
| R&D intensive SME | Up to 27% | Up to 27% | ||||
| Large company | 10.5% | Up to 16.2% | Up to 16.2% | |||
How much are R&D tax credits worth?
According to HMRC statistics for the tax year 2022 to 2023, the average R&D tax credit claim made under the SME scheme was around £81,000.
The average claim under the RDEC scheme for large companies was just over £291,000.
The benefits
As a form of innovation funding, R&D tax credits can transform your business. At ForrestBrown, we are passionate about helping innovative companies realise the full potential of R&D tax incentives so that they can grow. This is because the benefits are wide-reaching.
The government benefits from increased productivity which is good news for UK businesses, and good news for the economy. It can also lead to innovation that can effect positive change on a global scale.
Adding value to your business
We use a rigorous, continually-improving process to deliver robust R&D tax credit claims that meet HMRC’s latest requirements. We’d love to find out more about your business and discuss how we might be able to help.