The R&D( (research and development) tax incentive was brought in 2000 by the UK government to encourage scientific and technological innovation within the United Kingdom. At its base, the incentive is a Corporation Tax (CT) tax relief that may reduce a company’s tax bill if your company is liable for CT, in some circumstances it can result in a payable tax credit. The incentive is open to UK limited companies of all sizes, however depending on the size of the organisation, they will fall in either the SME or the RDEC incentive.

For the purpose of the R&D tax incentive, an SME (Small and Medium-sized Enterprise) is a UK Limited company that falls within certain criteria looked at by HMRC, these
are:

• Staff Headcount (less than 500)
• Either turnover (€100m) or balance sheet total (less than €86m)

There are exceptions to this in certain scenarios, the most common of which is that the SME company is part of a group (has partner and linked enterprises). This is because in this situation that company will need to consider its own data, a proportion of a partner enterprise’s data and/or the data of a linked enterprise.

• 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.
• Claim a tax credit if the company is loss-making, worth up to 14.5% of the surrenderable loss (this is capped at the lesser of either a) the amount of unrelieved losses sustained in that period by the company or b) 230% of the related qualifying R&D expenditure.
• Claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss (this is capped at the lesser of either a) the amount of unrelieved losses sustained in that period by the company or b) 230% of the related qualifying R&D expenditure.