A simpler way for small businesses to apply for R&D Tax Credits.
The R&D tax credits available to small and medium enterprises (SMEs) have been substantially increased over recent years. The super-deduction available has increased to 230% from 1 April 2015 with the cash back available to loss making SMEs now 33.35% of the qualifying expenditure.
The rise in the rate of relief for SMEs means that the cash value of claims for tax paying companies is £26 for every £100 of R&D spend from April 2015 (based on a 20% tax rate) and £33.35 for companies with losses.
These changes have made claiming R&D credits a lot more valuable to SMEs. Our Nifty R&D tax credits tool reduces the time and cost of SMEs claiming R&D credits.
What this means for large companies
HM Revenue & Customs (HMRC) have made the large company regime much more generous by introducing the Research and Development Expenditure Credit (RDEC).
RDEC allows larger companies from 1 April 2013 to recognise the benefit of their R&D claim effectively as a grant against cost, opposed to within the tax line, which helps add visibility. Loss makers are now also able to claim cash back from HMRC.
From 1 January 2018, the credit rate increased to 12% (from 11%), providing a net cash benefit of 9.72% at a 19% tax rate. Unlike the ‘old’ superdeduction scheme, which only had a cash value if the company was paying corporation tax; RDEC is payable regardless of the tax position, subject to some restrictions including a cap based on PAYE and NI.
Up until 1 April 2016 you had the option to continue claiming under the previous super-deduction R&D scheme, instead of the new RDEC. The old scheme works by providing an additional 30% super-deduction for tax purposes on qualifying R&D expenditure. £10m of qualifying R&D spend would result in an additional deduction of £3m, which at a 20% tax rate results in a £600k cash saving.