R&D Tax Credits
What is R&D?

In 2000, the Government introduced a scheme to encourage scientific and technological innovation in the UK.

The R&D Tax Credit is a relief against Corporation Tax (CT) which either reduces your liability in prior (or future) years or, if you are loss-making for tax purposes, may entitle you to receive a cash tax credit payment.

There are two scheme variants dependent upon whether your business qualifies as an SME or as a ‘large’ company. Either way, we establish this with you before the process begins.

Projects which qualify as R&D

Activities which qualify for R&D tax relief must be part of a specific project which seeks an advance in science or technology and which relates to your company’s existing trade (or one you intend to begin, pending the project outcome). To obtain the R&D Tax Credit relief, you’ll need to demonstrate;

  • The scientific or technological advance being sought
  • The uncertainties encountered
  • The activities undertaken in overcoming the uncertainties (regardless of success)
  • Why the outcome couldn’t have been predicted at the outset

Your project may research or develop a new process, product or service, or simply improve an existing one.

Eligible R&D Expenditure
What is it worth?

The amount you ultimately receive depends not only upon the level of qualifying activity and the costs incurred, but also on the tax profile and size of your company as this will determine the scheme under which your claim can be made. For the purposes of this legislation, an SME is a company which employs fewer than 500 full-time staff and either has;

If you breach these limits, your claim will be made under the Research and Development Expenditure Credit (RDEC) scheme.

Expenditure which can be claimed

There are specific project-related costs which may be reclaimed providing they were incurred after you’d identified the uncertainty to be overcome but before you’d either achieved the desired outcome, or work on the project was stopped.

Capital expenditure is generally excluded unless the expenditure has been capitalised as an ‘intangible fixed asset’. The main types of expenditure relates to revenue expenditure incurred by your company in the following areas:


Find out more about SME Find our more about Large Company

£26.9b

Total amount of paid out since
inception of the scheme in 2000

300k

Total amount of claims made
since inception of the
scheme in 2000

£4.4b

Total amount of benefit claimed
in the 16-17 period

The full R&D Statistics are released each year in September and can be viewed on the following link:

learn more

SME

SME scheme
For every £100,000 of qualifying expenditure identified, a company with a CT liability could receive up to £24,700 as a tax refund or a reduced liability in future years (based on a 19% corporation tax rate), whilst a company with no CT liability could receive a cash tax credit payment of up to £33,350

£21.4b

Total amount of paid out since
inception of the scheme in 2000

240k

Total amount of claims made
since inception of the
scheme in 2000

£3.5b

Total amount of benefit claimed
in the 16-17 period

£54k

Current average claim for SME’s

Large company

RDEC scheme

For every £100,000 of qualifying expenditure identified, a company could receive a cash benefit of up to £9,720 regardless of whether or not you are paying tax.

The Research & Development Expenditure Credit Scheme (RDEC)

The RDEC scheme was introduced by HMRC in 2013 to supersede and replace the old large company super-deduction scheme from 1 April 2016. The fundamental difference between the SME and RDEC scheme is the way the benefit is calculated, by generating a relief/credit on the qualifying R&D expenditure. The rate of relief is currently 12% on expenditure incurred after 1 January 2018, up from the previous rate of 11%.

One of the main advantages of the RDEC scheme is the ability to show the benefit above the line to operating profit which enhances the companies profit and clearly shows the investment in Research and Development. This does mean that credit is taxable at the current corporation rate of 19%.

A major development under the RDEC scheme is that for the first-time loss making large companies can benefit from their Research and Development investment by way of an cash credit to increase cash flow and allow further investment in R&D.

The qualifying expenditure is the same as the SME scheme, except subcontracted expenditure which cannot be claimed unless the R&D is directly undertaken by the following:

  • A charity
  • A higher education institute
  • A scientific research organisation
  • A health service body
  • An individual or partnership of individuals

£21.4b

Total amount of paid out since
inception of the scheme in 2000

240k

Total amount of claims made
since inception of the
scheme in 2000

£3.5b

Total amount of benefit claimed
in the 16-17 period

£316k

Current average claim for Large Companies

200%

Rise in RDEC claims since inception
of the scheme

R&D claim Calculator

What is the financial position of your company?
What is your estimated spend on R&D per year?
£25,000 £500,000

We estimate you could receive up to

£6,200

as cash repayment

Innovation Tax