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R&D tax credits for SMEs

If you’re classed as a small or medium sized enterprise (SME), your research and development (R&D) costs could come under the more favourable SME R&D tax credit relief scheme. Find out everything you need to know about the scheme and how we can help you make a claim below.
What is the SME R&D tax credit relief?

What is the SME R&D tax credit relief?

The SME R&D tax credit relief scheme is an incentive provided by the UK government to encourage small and medium-sized enterprises to undertake innovation and development activities, and to reward them for doing so. The relief is based on the research and development costs that your company incurs.

Can you claim the SME R&D scheme?

Can my business claim under the SME R&D tax credit relief scheme?

Your business may qualify for the SME scheme if it falls under one of the following conditions:

  • Less than 500 staff
  • A turnover of under €100m
  • Or a balance sheet total under €86m

While this appears relatively straightforward, the SME status can be complicated if your company has external investors. These investors or shareholders can affect its SME status leading to the company being forced to claim under the less beneficial large company scheme. You may need to include the figures of connected companies and partner companies to work out if you are still considered an SME.

Additionally, a company cannot claim SME R&D relief if the project is already getting notifiable state aid or it has been subcontracted by another company. However, it may be able to claim the R&D Expenditure Credit (RDEC). This complication can lead to many errors in SME claims and we can help identify if you qualify for the SME scheme and review your claim.

How does the SME R&D scheme work?

How does the SME R&D scheme work?

SME R&D tax relief allows companies to:

  • Deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction
  • Or claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss. 

In monetary terms, an SME claim will be worth between 25% and 33% of the qualifying spend identified. To claim the relief, your company needs to be an SME and show how their project meets the definition of R&D.

What R&D costs can SMEs claim?

What R&D costs can SMEs claim?

  • Employee costs - directly or indirectly involved in R&D
  • Agency staff - costs for those directly or indirectly involved in R&D
  • Utilities - fuel, power, or water
  • Materials and consumables - items used in the R&D project
  • Software - used by the R&D team
  • Subcontracted R&D expenditure
  • R&D capital allowances
How do you claim SME R&D tax credits?

How do you claim SME R&D tax credits?

You can claim R&D relief up to two years after the end of the accounting period it relates to. You can claim the relief by entering your enhanced R&D expenditure into the full Company Tax Return form (CT600). If you make a trading loss, you can choose to surrender this and claim a tax credit. It will help if a summary report that explains how the project meets the definition of R&D, including the technical advances made and the technical uncertainties involved, is submitted with the claim.

How we can help

How Buzzacott can help with your R&D tax credit claim

Should you choose to get specialist SME R&D advice from Buzzacott, we will:

  • Identify if your business qualifies for the SME scheme
  • Carry out a comprehensive review of your R&D activity, working with you to ensure you are maximising your claim
  • Prepare a claim that minimises potential HMRC queries
  • Guide you through the whole SME claim process or on certain aspects of the claim.

Your claims will be prepared by our team of R&D tax specialists with a range of technical backgrounds. Our claims are part of our regulated services so you can be confident of the quality and standards of the work provided.

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