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R&D tax relief includes a range of Government sponsored incentives in the form of an additional 130% deduction (SMEs) which may result in either a repayable tax credit or a tax saving and an R&D expenditure credit (Large companies) or an R&D allowance (any company).
The R&D tax relief, Research and Development Expenditure Credit (RDEC) and Research and Development Allowance (RDA) regimes are submitted with your corporation tax returns. A company may claim for the last two completed accounting periods. That is, an amended tax return including an R&D claim may be submitted up to two years after the end of an accounting period.
HMRC expects companies to submit a claim document with any tax return including an R&D claim and has indicated the type of information it would like to see in these reports, without providing a specific template. At Knight, we will guide you through this process doing as much of the work for you as is necessary.
SMEs from all sectors may make claims for R&D tax relief so long as they have undertaken projects in a field of science or technology and meet the qualifying criteria. The SME regime is generous and can result in material benefits as tax savings or credits.
Additional deduction of 130% for a total enhanced deduction of 230%
Loss making SMEs may obtain a payable credit up to 33.35% of the qualifying expenditure
Profit making SMEs may receive a tax saving of up to 24.7% of qualifying expenditure
Like the SME regime, large companies from all sectors may potentially make a claim and receive an expenditure credit either as cash or reduction in tax payments.
The RDEC is normally accounted for above the line as income and amounts to 12% (from 1 January 2018) and 13% (from 1 April 2020) of qualifying expenditure.
The RDEC is subject to Corporation Tax and may be recognised as income, having a positive impact on EBITDA.
If you have incurred capital expenditure to facilitate R&D, the RDA regime provides an increased Capital Allowance on items that may not already be included in other available Capital Allowances. This regime is available to both SME and large companies.
Receive a 100% deduction in the year for capital expenditure incurred facilitating R&D.
Contact us to arrange an initial no obligation consultation to understand how Knight can assist you.