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Here we look at R&D Tax Credits in relation to SMEs specifically. Make sure your innovative small or medium sized enterprise doesn’t miss out.
Unfortunately, at Myriad Associates we’ve heard of many innovative small and medium sized companies missing out on the R&D Tax Credits they’re entitled to. Not only is this a waste of a great opportunity, it can also mean SMEs missing out on thousands of pounds of extra cash that’s needed now more than ever.
This article only looks at R&D Tax Credits in relation to SMEs specifically. R&D relief for larger companies (which tend to use the RDEC scheme), and other tax reliefs like Video Games Tax Relief or the patent box are also well worth exploring.
We hope this quick guide to the SME branch of R&D Tax Credits is useful, but of course if you have any questions please do get in touch with the R&D experts at Myriad Associates. Don’t forget you can also find out more about our service on our R&D Tax Credits page.
For years the government has strongly supported UK technological and scientific innovation, as it serves to boost jobs and bolster the economy. This is why, back in the early 2000s, it launched the very generous R&D Tax Credits scheme.
R&D Tax Credits mean that UK companies can receive a reduction in their Corporation Tax to reflect a portion of their research and development expenditure. Those that have made a loss don’t miss out either as they can apply for a cash lump sum instead.
Usually the relief is available to companies who have developed a brand new product, service or process, or who have made an appreciable difference to an existing one. The important thing is that money was spent on solving a specific scientific or technological challenge (more on this below).
We’re not just talking Bunsen burners and lab coats here; R&D Tax Credits are open to all UK companies regardless of sector or size. The definition of R&D in this context is extremely broad; as long as an organisation has undergone a project that has involved some element of scientific or technological research, then R&D Tax Credits could well apply.
The research must be original, and benefit the field in which the company operates - not just the company itself. The outcome of the project must also not have been obvious from the start, and must not have been easily solvable by a professional working in the field. It doesn’t even matter if the project ultimately failed in its objectives; a claim for R&D Tax Credits can still be made as long as the eligible types of research were undertaken.
If you’re not sure if your project will qualify for R&D Tax Credits or not, do get in contact with us at Myriad Associates. Our team consists of a broad range of R&D tax relief and grants specialists, all with unique skills in helping you to access the money you’re owed - efficiently and hassle-free.
This is where things get a little more complicated, because the R&D Tax Credits relief is administered under one of two branches: the SME scheme and Research and Development Enhanced Credit (RDEC). Most smaller sized and medium sized businesses will claim using the SME scheme, which is highly lucrative. In fact it’s possible to claim back as much as 33 pence for every £1 for R&D expenditure incurred. Larger companies, as well as smaller companies that have previously received certain types of state aid, will need to use RDEC.
As mentioned, we’re not going to cover RDEC in detail here, so we recommend reading our two recent blogs Everything You Ever Needed To Know About RDEC and R&D Tax Credits: What's The Difference Between The SME Scheme And RDEC?
Typically companies will use the SME branch of the R&D Tax Credits scheme if they:
If the company has links to other enterprises or is part of a group, then these thresholds will need to be aggregated when making your R&D Tax Credits claim.
HMRC has produced a set of manuals on the subject, and one you need here is at CIRD91500.
Generally speaking, qualifying expenditure must be deductible as a revenue expense of the trade for corporation tax purposes. This means it must not be capital in nature, however R&D capital allowances may be available for capital expenditure. Again this is something we can help you with.
Costs that can be included under the SME scheme are many and varied, and include:
It’s worth pointing out here that this list isn’t necessarily exhaustive and HMRC guidance is regularly updated. When you work with R&D tax specialists like Myriad Associates, we will take the time to get to know your business and your R&D project in detail so that all your costs are captured. This means you can be safe in the knowledge that over-claiming or under-claiming simply won’t happen, and you’ll received all the relief you’re owed.
R&D Tax Credits must be claimed a maximum of two years from the end of the accounting period during which the innovative project took place. Don’t leave it too late!
If you’ve got any questions about the SME branch of the R&D Tax Credits scheme, or about R&D tax relief and grants in general, then please do get in touch with our team. You can either call us on 0207 118 6045 or send us a message and we'll get back to you.
When you're ready, we'll also be happy to guide you through making your hassle-free claim, so it's accurate, optimised - and of course, successful. This can be either done using our full Myriad service, or for more self-managed claims that are still supported by us, why not try the Tax Cloud portal? It’s ideal for those with more straight forward tax affairs and is great value for money.