For expenditure incurred on or after 1 April 2023, the new rates announced in the Autumn Statement 2022 now apply.
The single R&D tax relief scheme, which merges the SME and RDEC schemes, is confirmed to go ahead for accounting periods starting on or after 1 April 2024. There is a reduction in the notional tax rate applied for loss-making SMEs in the new merged scheme from 25% to 19%. However, there is an enhanced rate for loss-making R&D intensive SMEs defined as a business whose qualifying expenditure represented 30% or more of their total expenditure.
The SME and RDEC schemes will merge into a single scheme for accounting periods starting on or after 1 April 2024.
With the SME R&D tax credit scheme you can currently claim tax relief of up to 33% on your qualifying R&D expenditure incurred up to 31 March 2023. After this new rates will apply.
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The Research and Development Expenditure Credit (RDEC) rate has increased over the years, companies can get over 10% of their R&D expenditure incurred up to 31 March 2023 refunded. Then this will increase up to 15%.
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Deciding which scheme to use is largely dependent on the size of your business, but there are other factors that need to be taken into account. Use our interactive decision tree to find out which scheme is the best fit for your business*.
It only takes a few seconds.
Even though your business is probably classified as an SME we have identified some reasons why you might not be eligible for the SME R&D scheme. However, you may well be able to claim through the RDEC scheme instead.
We match you with an industry, commercial, or technical expert that best suits your business. Irrespective of size and complexity, we will find the right technical expert who can add the most value to your claim.
We work alongside your accountant to complement their skills so there is no conflict. Your relationship with your accountant won’t be adversely affected.
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We will never share your details with any third party.
*The remaining 10% includes clients who no longer carry out R&D, ceased to trade, or have been acquired
We want to work with you to get the best results for your business. With Source Advisors every step will be easy and transparent.
The first step is to find out a little bit about your business, to understand how we can help you.
If we don’t think we can help at all, then we’ll let you know.
We set out what we can do for you, when we will do it and what we will charge. Everything is transparent. We hope the only surprise will be how much you can successfully claim.
You will be matched with a technical consultant, who will best understand your business and speak your language. We need to review your financial information to assess if a claim will be worthwhile and to give you an estimated claim value.
We will introduce you to your technical team and arrange initial meetings. They will spend some time with you to identify the areas where a claim can be made – we know where to look.
Taking the things that we’ve learnt about you, we will work with our tax experts to pull everything together. We know what HMRC is looking for and what makes a successful claim.
We may need some follow up information to evidence the claim.
The report is sent to you for approval and this will give you the size of the claim. We are authorised to submit a claim to HMRC on your behalf.
If HMRC come back with further questions then we will of course deal with them for you. Your award will come to you as a cheque or a tax allowance – usually within a month of submitting a claim.
Below are some frequently asked questions about making R&D tax relief claims. If you have any further questions please contact our team who will be happy to advise you.
In the UK, companies are able to claim tax relief for their qualifying R&D activity. The schemes, for SMEs and larger companies, are both administered by HMRC. Historically SMEs could claim back up to 33% of the amount they’ve spent on qualifying R&D. From the 1 April 2023 this will reduce to a maximum of 18.6% for loss making companies, increasing to 27% if the company is R&D intensive (defined as their qualifying expenditure represents 40% or more of their total expenditure).
Companies who claim under the RDEC scheme historically received over 10% of their R&D spending refunded, for expenditure incurred on or after 1 April 2023 this will increase up to 15%.
The R&D scheme is administered by HMRC, therefore companies claim R&D relief by entering the total qualifying expenditure on the full Company Tax Return form, CT600. Tax relief is given as either a reduction in the tax liability or, if the company is loss making, a refundable tax credit payable as cash on the amount of qualifying R&D expenditure.
No, the company can be in a loss position. These losses can then be utilised (i.e. not carried forward for tax relief in the future) and the company receive an R&D cash refund, without paying any corporation tax.
One of the requirements for an R&D claim is that the qualifying costs are included in the accounts and are allowable for tax purposes.
Therefore, we need to check that the qualifying costs are included in the relevant accounts either in the profit and loss account or Intangible fixed asset additions, and also that they are not disallowed in the tax computation.
For tax purposes, R&D takes place when a project seeks to achieve an advance in overall knowledge or capability in a field of science or technology.
You can claim against certain costs that are allowable for tax purposes on the project including:
For full accounting periods starting on or after 1 April 2023 the following R&D related costs will also be allowable.
Within the SME scheme, a company can claim subcontractor costs (UK or overseas) for direct R&D activities, but for the RDEC scheme the subcontractor rules are more restrictive.
Yes, employees and externally provided workers (EPWs) are the only qualifying costs where indirect R&D activities can be claimed (i.e. subcontractors cannot claim for indirect R&D activities)
For SMEs, outsourced subcontractor costs (in the UK or overseas) that are undertaking qualifying direct R&D activities are allowable costs and can be included in the R&D claim. There is however a statutory deduction of 65% from the costs if the subcontractor is not connected or deemed to be connected to the company.
Generally, if the grant funding is “State Aid” then the company will need to make a claim under the RDEC scheme (even if they would normally qualify as an SME).
R&D tax relief may reduce your company’s tax bill if your company is liable for corporation tax or, if you make a loss, you may be able to surrender this loss and claim a tax credit. The R&D schemes enables companies with no corporation tax liability to benefit through a cash payment or a reduction of tax.
HMRC may open an R&D enquiry, firstly they will request further evidence, this could be Technical or Financial, often both.
Once the questions from HMRC have been addressed, HMRC may conclude either, that there is no qualifying R&D activity and request the claim is withdrawn, or if they agree that there is some qualifying R&D activity but this is not represented by the costs claimed, they will reduce the R&D claim to fairly reflect the qualifying R&D activities undertaken by the company.
As a Source Advisors customer if you face an HMRC enquiry we will defend it on your behalf at no extra charge.
We find that companies from many sectors and industries have the potential to claim UK R&D tax relief. Follow the link below to find out more.
The Patent Box is closely linked with R&D tax relief and a company can often claim tax relief under both schemes.
Source Advisors can offer you advice to maximise your claims across both schemes. Find out more about our IP services including Patent Box.
If the R&D project is subsidised. For example by a customer, a charity or a university.
You have a partner company if:
another company holds over 25% of your voting rights or capital
you hold over 25% of another company’s voting rights or capital
Your company is connected to another one if:
