What is R & D Tax Relief?

The UK Government’s R & D strategy encourages innovative companies who are contributing to the UK’s export of technology. European Union member countries set a goal of increasing R&D investment intensity to 3 per cent of GDP by 2010 in the Lisbon Agenda of 2000. Such targets are not limited to Europe or the OECD with China committing to a R&D intensity target of 2.5 per cent of GDP by 2020. The 2010 Dyson Report aims for the UK to be a leading EU exporter of high tech goods and services. The UK’S R & D policy has both a fiscal drive and a range of grants and subsidies for innovators of all sizes, from the small company to the R & D performer in a complex worldwide group. Tax Insight is able to help with this choice and assist innovative companies with value added supportive corporate tax strategy.

UK R & D Tax Relief

There are two schemes. The 2000 Finance Act introduced the UK R & D tax credit scheme for SME companies spending a minimum of £25,000. This was supplemented on 01 04 2002, with the ‘Large Company’ scheme.
The definitions for UK R & D are broad enough to permit claims from any business sector carrying out eligible work. The term ‘R & D’ is based on the Statement of Standard Accounting Practice [SSAP 13], which is then narrowed for tax purposes by the BIS Guidelines of both 2000 and 2004 and tax legislation. R & D for tax purposes takes place when a project seeks to achieve an advance in science or technology…..Click link below to read more

[pl_accordion name=”1″][pl_accordioncontent name=”1″ number=”1″ heading=”Click here to read more”] The company’s work that directly contributes to this will be R & D. Most SME claims will arise from the last of the three BIS definitions of eligible categories of R & D:

  • Pure research
  • Applied research and
  • Experimental (product or system) Development

To claim tax relief, project work must exhibit experimental activity; a common starting point is the thought that a solution may not even exist……..Click here for details of the BIS Guidelines

SME Scheme

An SME can deduct 225% of R & D project costs as a tax relief. Loss making companies can surrender R & D losses for cash of up to 25% of direct R & D costs.
Click here to read more…

Large scheme

A Large company is a concern that is not an SME.

From 01 April 2013, there are two R & D schemes open to Large companies. The Legacy CTA 2009 Scheme enables Large companies to claim up to 130% of R & D project costs as a tax relief. The new ‘R & D Expenditure Credit’ enables loss making Large companies to claim an ‘Above the Line’ repayable credit of 10% from 01 April 2013. The credit is taxable. Read more

Recent R & D Claims

R & D relief can be found in a wide range of development scenarios. If you are engaged in experimental product or system development; if you are reviewing cost or ‘green’ efficiencies in the productive process; if you are investing in quality or bespoke design on a scientific basis; you may be eligible….Read more

HMRC has recently agreed these R & D claims:

  • An IT design company engaged to upgrade NHS record systems
  • A software company engaged in replacing paper medical records with tablet style PDA’s for use by
  • A brewer engaging upon ‘reduced sugar’ lager production
  • A food manufacturer engaging in gluten – free, allergy and ‘diet’ confectionery product development
  • A retailer developing interactive logistics software across EEA countries to improve stock and order logistics
  • A retailer developing discreet security tags for high value stock
  • An engineering company designing bespoke lighting and audio systems in television centres
  • A digital marketing company improving multimedia IT communication levels
  • A Games Developer designing multi-level social media interaction platforms
  • A recruitment company developing a bespoke client / candidate communication platform
  • An FSA Registered firm developing new analytical techniques to evaluate financial products and the market
    place risks
  • A printing company developing enhanced card to desk print works
  • An actuarial firm designing enhanced statistical modelling and risk management systems
  • An Engineering company designing improvements to temperature sensor technology for aircraft
  • A furniture manufacturer investing in quality improvement and bespoke design


SME and Large Companies can claim relief for these costs:

  • Staffing costs – Including some of the costs for people not directly employed by the Company
  • Software and consumables – including project overheads
  • Equipment and Intangible Expenditure
  • Contributions to independent research

Useful to know:

  • For every £100k of ‘eligible’ costs, an SME can claim an additional tax deduction of £125,000, this might
    secure a tax saving of £ 25,000, tax–free
  • Equipment used in an R & D project qualifies for special capital allowances of up to 100%; particularly useful
    in 2012 and 2011, when AIA was capped at £50,000.
  • Unlike many EU R & D tax regimes, a UK company can carry out R & D activities anywhere in the world.