R&D Tax Reliefs


Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

R&D Tax Reliefs – The Facts

Yes, lovely wholesome tax relief.

What’s more it’s pretty attractive as well. Often clients will utter the words, ‘its too good to be true!’

In this case, it isn’t!

Overview – What is R&D Tax Relief

R&D tax relief only applies to Companies only.

Once, I did come across a rather disappointed LLP once which was heavily involved in qualifying activity. In isolation, the value of the R&D relief made a powerful argument for incorporating. However, there were commercial consideration that meant this was not the best option.

It is possible for a company conducting R&D as a member of a partnership to obtain relief – but we won’t go in to detail here.

There are two main R&D schemes

There are two main reliefs:

SME Relief

The Company must meet the definition of SME in order to qualify for this, the most valuable part of the R&D relief regime.

The form of SME relief is an Enhanced deduction of 130%. This means that in total, one can claim a total deduction of 230%.

If the Company is making a loss then it is possible for the Company to sell the loss that is attributable to R&D expenditure to HMRC for 14.5%.

For further details on the R&D SME Relief then please see our detailed article.

Research & Development Expenditure Credit (“RDEC”)

We used to have SME Relief and Large Companies Relief. The latter was replaced by the Research and Development Expenditure Credit or RDEC.

It is the only relief that non-SMEs or large companies can claim.

It will also potentially be relevant for your SME clients who cannot claim SME relief for various reasons.

Essentially, one is allowed a tax credit of up to 13% of the qualifying expenditure after 31 March 2020 and 12% before that date.

For further details on the R&D SME Relief then please see our detailed article.

R & D Tax Relief – Contact ETC Tax

If you have any queries about this article, or R&D in general, then please do get in touch. Also read our article on SME Tax Relief

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