Research and Development tax reliefs

Topic: Research and Development tax reliefs

There are two schemes for claiming relief for R&D expenditure. The schemes are known as the Small or Medium-sized Enterprise (SME) Scheme for smaller companies, and the Research and Development Expenditure Credit (RDEC) scheme for large companies.

Large companies can currently claim a 12% RDEC also known as an ‘above the line tax credit’ for qualifying expenditure. The 12% rate applies to expenditure incurred on or after 1 January 2018. The RDEC allows companies to claim an enhanced Corporation Tax deduction or payable credit on qualifying R&D costs. The RDEC replaced the large company scheme that was withdrawn in April 2016.

The SME scheme offers more generous reliefs. SMEs can currently claim R&D tax credits of 230% for expenditure. However, SMEs can elect to claim relief under the RDEC scheme if they are unable to claim relief under the SME scheme because of a grant or subsidy, or because they are carrying out subcontracted R&D work. A company is usually defined as an SME if staff headcount is less than 500 and either turnover is less than €100m, or balance sheet total is less than €86m.

If a company is seeking to develop or solve scientific or technological uncertainty for the benefit of their ‘sector’, then you may qualify for R&D tax reliefs. It should be noted that only certain costs are available for relief.

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