R&D Tax – Signpost


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 – Guides, Signpost & Advice

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.

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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.


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