R&D Tax Credits

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UK R&D Tax Relief

What are UK Research and Development (R&D) Tax Credits?

Since 2000, UK R&D Tax Credits have been a vital government incentive, rewarding British companies for their innovation and dedication to progress. They reflect the government’s pledge to cultivate a culture of ingenuity and investment in groundbreaking research and development initiatives spanning diverse industries.

Why should you care about R&D Tax Credits?

An estimated total amount of relief claimed for the 2021 – 2022 tax year was £7.6 billion and this amount increases year on year.

Considering the number of companies claiming the relief in the tax year 2021 – 2022 was 90,315,2 a simple calculation (total relief/Number of companies that made a claim) shows the cash injection that your company could be missing out on to put towards further innovation.

Which shows the average relief obtained per company is £84,150.

Clearly, this is a dilution of the intricacies of the UK R&D Tax Credit scheme and navigating these intricacies is more important now than ever and that’s where our experts are on hand to help you to maximise your claims and submit them with confidence.

There have been many changes to the UK R&D Tax credits scheme in the last few years and ensuring you work with someone knowing the ins and outs of these changes is exceptionally important.

N.B. these are the most recent figures and the next planned update is to be given in August 2024 https://www.gov.uk/government/statistics/corporate-tax-research-and-development-tax-credit/ research-and-development-tax-credits-statistics-september-
2023#:~:text=4.-,Amount%20of%20relief%20claimed,total%20of%20%C2%A36.8%20billion.

R&D Growth Cycle

One of the most lucrative parts of R&D Tax Credit relief is that you can then reinvest your relief into further innovation and increase your benefit.

Is my Business Eligible for R&D Tax Credits?

There are various elements needed to provide a satisfactory answer to this question.

Firstly, eligible research and development can come from any sector. The diagram below shows the industries R&D Tax Credits claims came from in 2021 -2022:

To dig into whether your specific company is eligible, some criteria are common for all companies, your company must:

  • Be a UK-registered business that is liable for corporation tax (LLPs and Sole traders are ineligible);
  • Have done research and development as defined by the R&D Tax Credits scheme; and
  • Have spent money on the qualifying research and development activities as defined by the R&D Tax scheme.

The first point is self-explanatory; however, the remaining points are where booking a free consultation with an expert will allow you to see whether making a claim is viable.

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Changes to the UK R&D Tax Credits Scheme

Recent years have brought significant changes to UK R&D Tax Credits, emphasising the importance of staying updated to maximise claims effectively.

Here’s a summary of some of the most recent changes:

2023
The enhancement rate for the SME scheme was reduced from 130% to 86%.
The surrender rate for the SME scheme was decreased from 14.5% to 10%.
The RDEC rate saw an increase from 13% to 20%.
Certain expenses related to cloud computing and data became eligible for relief.
The definition of R&D for tax purposes was expanded to include pure mathematics.
A new R&D-intensive scheme was launched, offering the original 14.5% surrender rate to loss-making SMEs that have allocated at least 40% of their total expenditure to qualifying R&D.
Plans to eliminate relief for overseas subcontractor costs were postponed.
The implementation of a new additional information form requiring companies to disclose detailed financial and technical data about their R&D was introduced.
2024
Introduction of the claim notification form, affecting companies that are either filing for the first time or haven't filed in the last three accounting periods.
Announcement of the newly merged scheme, consolidating RDEC and SME R&D Tax Relief for both profitable and non-R&D-intensive loss-makers.
Reduction of the R&D-intensive threshold from 40% to 30% for claims pertaining to financial periods beginning on or after 1 April 2024.

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