R&D Tax Credits

R&D Tax Credits

What Are R&D Tax Credits?

Research and Development (R&D) reliefs support all companies that work on innovative projects in science and technology. It can be claimed by companies that aim to research & develop an advance in their field whether it ends in success or not.

To secure R&D tax credit relief you need to explain how your project:

  • sought an advance in science and technology,
  • had to overcome uncertainty,
  • could not be easily worked out by a professional in the field.

Who Is Eligible for SME R&D Relief?

Companies which are Small and Medium sized (have less than 500 staff AND turnover under €100 million or a balance sheet total under €86 million) may claim (SME) R&D Relief.

How Does It Work?

SME R&D relief allows companies to deduct an extra 130% of their qualifying R&D costs from their annual taxable profits on top of the normal 100% deduction (total 230%). This reduces corporation tax dramatically. Companies may also claim tax credit if the company is loss making (restricted to 14.5% of the surrenderable loss).

Research and Development Expenditure Credit (RDEC)

This replaces the large company scheme which was in place in April 2016. This is for companies that don’t meet the criteria to qualify as an SME and for companies that have been subcontracted to do R&D work by a large company.

The RDEC is a tax credit worth 11% of a company’s R&D expenditure prior to 01/01/18 and 12% of a company’s R&D expenditure since 01/01/18.

What Can Be Claimed? (Qualifying Costs)

Project costs that can be claimed include staff costs (wages, salaries, National Insurance Contributions and pension contributions), consumable items (materials & utilities). Costs that cannot be claimed include subcontracted staff costs in certain circumstances, production and distribution of goods or services, capital expenditure, cost of land, rent, rates and costs of patents & trademarks.