Small and medium sized enterprise (SME) Research and Development (R&D) tax credit claims provide a super deduction of 230%* on qualifying R&D expenditure. This super deduction reduces the amount of taxable profits subject to tax at 20% and therefore provides a cash benefit of c26%.
Additionally, if a company does not have any taxable profits (i.e. has taxable losses during the year), there is an ability to surrender taxable losses (up to the 230% super deduction) for cash back of 14.5%. This in effect provides cash back of 33.35%.
To be eligible to make an SME R&D tax incentive your business must meet certain criteria:
be a UK registered trading company;
does not receive funding for its R&D activities (nor has the work being subcontracted to your business)**
meets the definition of an SME (see below)**
An SME is defined as a company having less than 500 employees and annual turnover under €100m or gross assets of not more than €86m. It can be complex to determine whether a company is an SME as the wider group and investors also need to be considered.
If you are unsure whether you meet the definition, please contact us via firstname.lastname@example.org.
*230% super deduction applies from April 2015 (225% for expenditure incurred before this date)
**You may be eligible to make a ‘Large Company’ R&D claim (also known as an R&D Expenditure Credit (RDEC) claim) if you do not meet the definition of an SME, you have received funding or the work has been subcontracted to you. You may still be able to use Nifty R&D to prepare your claim but we will need to discuss with you the differences between SME R&D claims and Large company R&D claims, and may need to discuss alternative fee arrangements.