Companies are currently able to claim tax credits for their Research & Development in the UK via two routes, both administered by HMRC. These UK government incentives are designed to encourage innovation by rewarding businesses who work to improve or overcome challenges and uncertainties in their products and processes.
One route is for small and medium size businesses (SMB), the ‘SME R&D tax credit scheme’ (in the UK SME stands for small and medium enterprises). Whilst for larger companies it’s the ‘Research and Development Expenditure Credit (RDEC)’.
Which UK R&D Tax Credits Scheme is Right for Me?
Usually it is the size of your business that decides which scheme to use, but there are other factors that need to be taken into account so it’s important to get specialist advice.
What is the Value of R&D Tax Credits in the UK?
The calculation for SMBs means that companies could claim back up to 33% of the amount they spent on qualifying R&D, however for expenditure on or after April 1, 2023, the rates will be lowered. From that date, the maximum will be 18.6% for companies with revenue loss, or up to 27% if the company is R&D intensive. For tax purposes, an R&D intensive SMB has qualifying expenditure which represents 40% or more of their total expenditure.
For SMBs the enhancement rate for R&D expenditure on or after April 1, 2023 will be 86% (reduced from 130%) and the tax credit rate reduced to 10% (from 14.5%). R&D intensive companies can still claim a tax credit at 14.5%.
For companies who claim under the RDEC scheme the expenditure incurred on or after April 1, 2023 will increase from 10% of their R&D spending refunded up to a rate up of 15%.
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