R&D Tax Reliefs
R&D Tax reliefs are claimable by companies across a wide range of sectors, including software, life sciences, manufacturing, engineering, and construction, amongst others.
R&D Tax Relief Schemes
For accounting periods beginning on or after 1 April 2024, two forms of support are available:
1. New R&D Tax Expenditure Credit Scheme (RDEC).
The new merged RDEC scheme applies to companies carrying out qualifying R&D activities, regardless of size.
Under the scheme:
- A taxable above-the-line credit of 20% is available on qualifying R&D expenditure.
- The net benefit is generally between 15% and 16.2%, depending on the company’s corporation tax rate.
- The credit can first be used to offset the company’s corporation tax liability.
- Subject to various restrictions and caps, any excess is receivable in cash.
- Unused amounts may also be carried forward or surrendered in certain group situations.
2. Enhanced R&D Intensive Support (ERIS) scheme.
The ERIS scheme is available to certain loss-making SMEs that are considered R&D intensive.
A company is generally regarded as R&D intensive where qualifying R&D expenditure represents at least 30% of its total relevant expenditure for the accounting period.
Under the ERIS scheme:
- qualifying R&D expenditure receives an enhanced deduction of 86%; and
- surrenderable losses attributable to R&D may qualify for a payable tax credit at a rate of 14.5% providing a significantly higher cash benefit for eligible loss-making SMEs.
Who can claim R&D Tax Reliefs?
- The tax reliefs are available to UK companies, undertaking eligible R&D activities.
- The companies must be subject to UK Corporation Tax.
- The claimed expenditure must be revenue in nature and deductible for tax in the UK.
- The claim must relate to the trade of the company.
-
The company must be a going concern when the claim is made.