HMRC provide a number of financial reliefs or incentives to encourage businesses to invest in innovation. These include:
- Research & Development (R&D) Tax Reliefs or credits and R&D allowances (RDA)
- Patent Box
- Creative industry tax reliefs (CITR)
- Innovation and growth grants
- Intellectual property
R&D Tax Reliefs provide tax deduction for smaller and medium sized businesses (SMEs) under the SME scheme, or a Research and Development Expenditure Credit (RDEC) for large companies qualifying R&D expenditure. Often these reliefs are also collectively referred as R&D tax credits.
The merged scheme R&D expenditure credit (RDEC) and enhanced R&D intensive support (ERIS) replace the old RDEC and small and medium-sized enterprise (SME) schemes for accounting periods beginning on or after 1 April 2024. The expenditure rules for both are the same, but the calculation is different.
The calculation and the payment steps of the merged scheme RDEC are broadly the same as the old RDEC scheme, however a lower rate of notional tax restriction at step 2 of the payment steps is available to small profit-makers and loss-makers and a more generous PAYE cap applies.
The table below summarises. the potential tax benefit for to be gained under the schemes.
| SME Scheme | RDEC Scheme | Merged Scheme – R&D expenditure credit (RDEC) | Enhanced R&D intensive support (ERIS) for SME’s | |||
| Up to 31/03/2023 | From 01/04/2023 | Up to 31/03/2023 | From 01/04/2023 | From accounting periods starting on or after 01/04/2024 | From accounting periods starting on or after 01/04/2024 | |
| Profitable company | 130% uplift on costs = 24.7% net benefit | 86% uplift on costs = 21.5% net benefit | Headline rate 13% = 10.5% post tax | Headline rate 20% = post tax rate between 14.7% – 16.2%* | Headline rate 20% = post tax rate between 14.7% – 16.2%* | Not applicable |
| Loss making company | Costs plus 130% uplift = 230 x 14.5% repayable credit = 33.4% subsidy | Costs plus 86% uplift = 186 x 10% repayable credit = 18.6% subsidy | 10.5% subsidy | 15% subsidy | 16.2% subsidy | Not applicable |
| Loss making R&D intensive company | Not applicable | Costs plus 86% uplift = 186 x 14.5% repayable credit = 26.97% subsidy | Not applicable | Not applicable | Not applicable | Costs plus 86% uplift = 186 x 14.5% repayable credit = 26.97% subsidy |
How can we help?
At TAP we provide Innovation Tax Reliefs services with a difference. We offer a unique blend of technical expertise, experience, and a delivery approach where the client’s needs are our priority.
We work with owner managed businesses and private equity backed groups, together with large international and quoted groups.
Working across the UK and leveraging our international network, we can bring the latest tax opportunities based on evolving tax legislation and HM Revenue & Custom’s (HMRC) approach.
We have brought together a number of detailed webpages that should help you if your business is involved in creating intellectual property, developing techniques to improve efficiencies or working on developing ground-breaking ideas in your sector. Our pages will help you determine if your R&D activities are likely to qualify for tax relief and our R&D Tax calculator should help you quantify the amount that may be available to you.
If you are considering investment in R&D our team can help you understand what types of expenditure will be allowed and the best way to organise your accounting processes to ensure your claim is successful.
Click on the image map above to go directly to the relevant pages to find out more. Our Innovation Tax Reliefs team are very approachable so please give us a call on 020 8037 1030 to explore how we may be able to assist you to make a claim for tax relief, alternatively complete the enquiry form on this page and we’ll get in touch with you.
