If you’re wondering about your R&D tax relief eligibility, this FAQ provides a general overview of how to determine if your company qualifies under the current R&D tax relief schemes, including the specific criteria your projects must meet to make a successful claim.
Research and Development relief (R&D) is a valuable tax relief for companies which gives an additional deduction of 86% on qualifying R&D expenditure from 1 April 2023 (the previous rate was 130%). This can reduce profits or create or increase a loss. Any loss created can be relieved against future or past profits or exchanged for a cash credit.
R&D relief is available to companies only; partnerships and LLPs cannot make a claim.
To qualify for the relief the company must carry out a project(s) which are intended to make an advance in science or technology. The claim must relate to the company’s trade, either a trade which already exists or one that it intends to start up based on the results of the R&D. The claim can relate to both the development of entirely new products or processes or improvements to existing ones.
To claim you need to explain how a project:
- looked for an advance in the field
Your project must aim to create an advance in the overall field, not just for your business.
The process, product or service can still be an advance if it’s been developed by another company but is not publicly known or available.
- had to overcome the scientific or technological uncertainty
A scientific or technological uncertainty exists when your company or an expert on the subject cannot say if something is technologically possible, or how it can be done, even after referring to all the available evidence.
This means that your company or experts in the field cannot already know about the advance or the way to solve it.
- tried to overcome the scientific or technological uncertainty
To explain how you tried to overcome the scientific or technological uncertainty, you should show that the R&D needed research, testing and analysis to develop it.
You need to be able to explain the work you did to overcome the uncertainty. This can be a simple description of the successes and failures you had during the project.
- could not be easily worked out by a professional in the field
You should explain why a professional could not easily work out your advance. You can do this by showing that other attempts to find a solution had failed.
You can also show that the people working on your project are professionals in that field and get them to explain the scientific or technological uncertainties involved.
Your project may research or develop a new process, product or service or improve on an existing one.
Types of R&D Tax Relief
There are 2 R&D tax relief schemes depending largely on the size of the company
SME (small and medium sized R&D tax relief)
This can be claimed by a company to which both of the following apply
- Less than 500 staff
- Turnover of less than 100 million euros or net assets of less than 86 million euros
From 1 April 2023 the relief is 186% of qualifying expenditure. Where a loss is made the R&D enhanced expenditure can be surrendered for a payable tax credit of 10% of the loss. Any payable credit for a period starting on or after 1 April 2021 is however capped by reference to the total of the companies PAYE and NIC liabilities for the period.
R&D expenditure credit (RDEC)
Large companies can claim expenditure credit of 20% from 1 April 2023 (previously 13%)
This can also be claimed by SMEs who have been subcontracted to do R&D work by a large company.
Understanding whether your company qualifies for R&D tax relief can significantly impact your financial planning and project development. This overview is designed to help you navigate the eligibility requirements and ensure you’re making the most of available benefits. If you have specific questions about R&D Tax Relief, don’t hesitate to reach out to our expert accounting team for tailored advice.