R&D Tax – Guides, Signpost & Advice

R&D Tax 

R&D tax relief was introduced in the 2000/01 tax year.

It was, and remains, a way of providing an enhanced deduction for qualifying expenditure in research and development activity.

Two versions of the scheme

There are principally two versions of the scheme:

• SME Relief – which provides a ‘super deduction’ of up to 230% of qualifying expenditure or a payable tax credit if the business is making a loss;
• Other relief under RDEC – used to be called large companies relief but is now called the Research and Development Expenditure Credit (RDEC)

R&D facts & figures

In the first year, only 1,860 claims were made in total. Fast forward to 2017/18 and that is over 48,500

Recent statistics show that the current cost of the tax relief is about £4.3bn a year – quite a bit more than Entrepreneurs’ Relief (£2.7bn) which was found to be too expensive and restricted to within an inch of its life.

£1.8bn of this went to large companies rather than SMEs.

However, it appears that the Government is fully behind R&D relief and there is no indication that it will be removed.

R&D Advance Assurance

It’s worth pointing out that there is an ability to obtain Advance Assurance – this essentially enables a Company to make its own claims with the pre-approval of HMRC.

For Companies:

• with less than £2,000,000 in turnover;
• with fewer than 50 employees which have not previously claimed R&D relief

HMRC will confirm whether they are conducting qualifying R&D. Where assurance is given, then the first three years of R&D claims will not be subject to enquiry as to whether the R&D undertaken is qualifying.

Video blogs on this topic

• Does your work qualify for research and development tax relief?
• Does my company qualify for research and development tax credits?
• How to make a claim for research and development tax credits
• How much can I claim?
• What is ‘qualifying expenditure’?
• Why do so many companies not claim Research and Development relief?

Detailed articles on this topic

• What is research and development?
• R&D tax reliefs
• SME tax relief
• R&D qualifying expenditure
• Research & Development Expenditure Credit (“RDEC”)
• State aid and research and development tax relief – How do the two affect each other?
• HMRC Update – R&D Tax Relief & COVID-19
• Can R&D tax relief help your clients’ in the Coronavirus crisis?

If you have any queries regarding this article, or research and development tax relief at all, then please do not hesitate to get in touch.