UK R&D Tax Relief

The R&D Tax Relief for small and medium sized enterprises (SMEs) was introduced in 2000 to encourage UK companies to perform research and development and to promote investment in innovation. The R&D expenditure credit (RDEC) followed in 2002 as a separate initiative to inspire growth and innovation across the UK for large corporations. Both tax credits are vital and important with job growth and providing prosperity. With two separate credits it is very easy for companies to have confusion on which one they qualify for. This page will breakdown the difference between the R&D Tax Relief and the RDEC, outlined by HMRC.

R&D Tax Relief

  • Companies That Can Qualify
  • Less than 500 staff (SME)
  • Turnover less than €100m or having a balance sheet less than €86m
  • Qualifying Costs
  • Salaries/wages related to the R&D project
  • Subcontractors
  • Software
  • Consumable items
  • Return On Investment (ROI)
  • 130% enhancement deduction on qualifying costs along with the normal 100% deduction allows for a 230% deduction
  • 14.5% if the company is in a loss position

R&D Expenditure Credit (RDEC)

  • Companies That Can Qualify
  • Large corporations with 500 staff or more
  • SMEs subcontracted by large corporations to conduct R&D
  • Qualifying Costs
  • Salaries/wages related to the R&D project
  • Subcontractors only undertaken by a charity, educational institute, or research organisation
  • Consumable items
  • Return On Investment (ROI)
  • 12% on qualifying expenditures up to March 31, 2020
  • 13% on qualifying expenditures starting on or after April 1, 2020
To qualify for the R&D Tax Relief or RDEC, companies must be looking to resolve a scientific or technological uncertainty. The focus of these programs are designed to encourage research and innovation not business development or sales initiatives. 
The R&D Tax Relief as well as RDEC can be claimed going as far back as 2 years. For example, a company with a December year-end can make a claim under either program as far back as December 2019 as the claim will not be due until December 2021.

How Can Braithwaite Ireland Assist

Braithwaite Ireland takes a 7 step approach to maximise every R&D Tax Relief claim filed to HMRC (Detailed description of the 7 step approach).

  1. Initial Exploratory Meeting
  2. Offer of Service & Presentation of Offer
  3. Kickoff Meeting & Preliminary Project Identification Stage
  4. Science Data Compilation Phase
  5. Financial Data Compilation Phase
  6. Project Review & Finalisation
  7. R&D Claim Submission

For further information on how Braithwaite Ireland can assist your company in successfully preparing an R&D Tax Relief claim to HMRC, please contact us today.

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