Research and Development tax credits are a valuable company tax relief that can reduce a company’s tax bill, or, for some, provide a cash repayment, of up to just over one-third of the company’s R&D spend.
A company must be carrying on a project seeking an advance in science or technology, through the resolution of uncertainty. The allowable expenditure includes four main areas – staff costs, subcontractors, software and consumable items.
The company must qualify as an SME to obtain this very generous relief (headcount below 500 staff and at least one of; turnover below €100 million or gross assets less than €86 million).
There is less generous scheme, known as RDEC, available to companies which do not qualify as SMEs. The RDEC is a taxable receipt, and is paid net of tax to companies with no corporation tax liability. The rate was recently increased from 11% to 12%, effective from 1 January 2018. The net cash benefit is 9.7%, (the 12% rate reduced by the corporation tax rate, currently 19%).
Where grants are received for an R&D project, there can be restrictions on what claims can be made under the SME scheme, depending on the type of grant. If this is the case, you should still be able to claim via the RDEC scheme. This is quite a complex area and it is best to get advice in advance.
Make sure you don’t miss out on these valuable reliefs. Speak to us for specialist R&D advice.