Which scheme are you eligible for?
Is the company profit or loss making?
What is your annual costs (before VAT) on staff, agency workers, software and consumable items relating to R&D activities?
What is your annual expenditure (before VAT) on unconnected sub-contractors who are involved with R&D activities (£)
Does the above represent 40% or more of total spend in the accounting period
For a profit-making SME, R&D tax credits will reduce your Corporation Tax liability for the year. The minimum rate of relief is 21.5%.
Relief is given by applying an enhanced deduction to taxable profits of 86% of the eligible spend. The revised taxable profits are then subject to the current rate of Corporation Tax which is 25%.
As an example; if you spend £200,000 on R&D you can knock just under £43,000 off your Corporation tax bill for that year.
For a loss-making SME, R&D tax credits will be given in the form of a cash payment. In these circumstances the rate of relief equates to broadly 18.6%.
The revised losses are surrendered to HMRC in exchange for this cash payment. The cash payment is calculated at 10% of the losses surrendered (for non-R&D intensive companies). As an example: if you spend £200,000 on R&D you can receive cash of up to £37,200.
For more information visit our R&D tax credits page.
The Research & Development Expenditure Credit (RDEC) is available to Large Companies who fail to meet the eligibility criteria for the SME scheme as well as SMEs who are prevented from claiming under the SME scheme.
The RDEC is a standalone credit that is brought into account as a receipt when calculating trading profits. The current rate for the RDEC is 20%.
The relief is then given by either offsetting the RDEC against your tax bill or where there is no tax payable, a cash payment will be made to you. The benefit works out to be 15% of the R&D eligible expenditure.
For example, if you spent £200,000 on R&D during the year you could receive a £30,000 tax reduction or cash payment.
Our R&D tax credits calculator only gives a rough estimate of the potential corporation tax saving or R&D tax credit payable that you may be eligible to claim. It is based upon your R&D costs entered. However, in-depth research is recommended for companies who want to make sure they identify all qualifying projects and expendables. We have seen countless instances where those not using a specialist service fail to claim their full entitlement - why take that risk when our expert advice can ensure you receive the maximum return?
Get in touch with us today if you'd like more accurate estimations of your costs and projects!