Page Title

HMRC’s SME R&D Tax Credit Incentive

Learn everything you need to know about SME tax credits.

Overview

If your company has fewer staff than 500 and a turnover under £85 million pounds, then HMRC consider you to fall into their SME category, (you can include linked companies if you are part of a group).

HMRC’s R&D Incentive allows a company to deduct an enhanced 130% of their qualifying costs from their yearly profit in addition to the normal 100% deduction which combined makes a total 230% claimable amount for a tax credit or if the company is loss making it can be worth up to 13.5% of the surrenderable loss.

Current Average UK Benefit

Claims submitted for 2017/18 accounting periods have benefitted from tax credits worth over £53,000’s.

Who Qualifies?

As long as you are a UK limited company, Community Interest Company or for larger organisations, have one of these in your company structure, you can claim R&D tax credits.

SME or RDEC Scheme?

If your company has fewer than 500 staff or turns over less than £85 million pounds per year, you can qualify for the more generous SME R&D incentive.

Profitable or Not Profitable

Many companies assume because they are loss making and have no corporation tax due that they are not eligible. This is not the case and we urge clients in this situation so we can advise the various ways in which you can receive the benefit from HMRC.

Allowable Costs to Claim

Maximise your tax credit claim to it's full potential

PAYE Salary

A % of employees time is quantified within your claim. This includes wages, over time payments, bonuses, commissions or additional cash payments.

Employers NI Contributions

In addition to PAYE the employers NI contributions can be contributed towards your R&D claim.

Employers Pension Contributions

Factoring these in as well means your tax credit claim is legitimate but sizable.

Software

Software licences for programs and systems which sole purpose of implementation was related to the project are eligible costs.

Sub-Contractors Costs

Sub-Contractors are a common cost for R&D projects and you can claim up to 65% of their invoiced rates.

Externally Provided Workers (EPWs)

These are employees usually provided by an agency who work under your supervision, direction and control.

Consumables (Materials & Wastage)

Materials, Overheads and any Wastage which was involved in the project.

Pharmaceutical Clinical Trial Volunteers

If you are working in the Pharmaceutical industry then there are certain costs for clinical trial volunteers which can be attributed towards your R&D claim.

Costs Which Cannot Be Claimed

Benefits of buying this product

Market Research

A lot of companies will carry out extensive market research before embarking on a costly project. These costs cannot be part of your R&D claim.

Legal Costs

Legal costs pertaining to R&D projects are not eligible to be accounted for within your claim to HMRC.

Marketing Costs

If your project has been successful or you anticipate it will be, the costs to commercially market your finished product / service are not allowable.

Patent Costs

Patent costs are not allowable under the R&D incentive from HMRC but there is a separate scheme called Patent Box which we can also help with if you are at this stage.