Research and development (R&D) tax credits – a simple guide

More businesses across the UK are claiming R&D tax credits, but the guidelines and eligibility criteria can be confusing. Nicola Roby, director at CHW Bolton Accountants has put together a simple guide.

R&D tax credits are available to eligible companies, to reclaim funds for projects that involve innovation in technology or science fields. Even if the project was unsuccessful, a business may still claim tax relief on the cost of the work it carried out.

There are two types of R&D tax credit; Research and Development Expenditure Credit (RDEC) and SME R&D relief. RDEC is only suitable for businesses with over 500 staff, a turnover of above €100m or balance sheet total over €86m.

If you wish to claim R&D tax credit for a specific project, it must involve work that tries to make an advance in science and technology areas. HMRC states that you need to be able to demonstrate that the project:

  • Looked for an advance in science and technology.
  • Had to overcome uncertainty.
  • Tried to overcome this uncertainty.
  • Couldn’t be easily worked out by a professional in the field.

These guidelines can seem a little ambiguous, so if you’re unsure if your project qualifies for tax relief you should contact the team here at CHW in Bolton for expert advice.

The amount of tax credit you can receive depends on if you’re claiming under the RDEC scheme or the SME R&D relief scheme. If you are eligible for RDEC accounting treatment, you will receive a tax credit for 11% of your qualifying R&D expenditure. If you fall under the SME R&D scheme, you can either deduct an extra 130% of qualifying costs from yearly profit, as well as the normal 100% deduction, to make a total 230% deduction or claim a tax credit if your company is loss-making, worth up to 14.5% of the surrenderable loss.

In last year’s Autumn statement, the Chancellor focused on embracing change and technological advancement, with R&D tax credit being a key a part of this.

It was pledged that the government would make up any shortfall arising due to the EIF (European Investment Fund) freezing investment into UK funds. An extra £2.3bn will be ploughed into R&D credits between now and 2022, bringing the annual total to around £12.5bn.

The Chancellor also announced that R&D tax credit would be raised by 1% to 12% for the RDEC  scheme.

The process to apply for R&D tax credit can be long and complicated, with HMRC often changing the criteria of what exactly counts as an eligible project. If you’re considering applying for tax credit it is best to consult with our team here at CHW as we deal with claims on a day to day basis.

For advice on any this or any other issue contact Nicola Roby at CHW Bolton Accountants on 01204 534031 or via email at Nicola.roby@chw-accounting.co.uk.


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.

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