R&D Tax Incentives

The UK R&D Tax Incentive regimes are designed to promote private sector investment in innovation.

Small and Medium-sized Enterprises (SMEs) can claim under the R&D tax credit scheme, whereas large companies (and SMEs carrying out funded or contract R&D) can claim under the Research and Development Expenditure Credit scheme (RDEC). At present, SMEs can claim up to 33p for every pound of eligible expenditure on in-house, unfunded R&D and can receive a cash payment even if they are loss-making or pre-trading.

As part of the Autumn Statement in November 2022, the Government announced changes to the rates of R&D tax relief. These affect current claimants of R&D tax relief under both the SME and RDEC schemes and apply to expenditure incurred on or after 1 April 2023. From this date, a company claiming under the SME scheme will receive relief of up to 21.5p for every pound of eligible expenditure incurred, and a company claiming under the RDEC scheme will receive up to 15p for every pound of eligible expenditure incurred.

The Government is currently consulting on whether the SME and RDEC regimes should be consolidated into one R&D tax relief rate (similar to other R&D regimes internationally). Narrowing the gap between the rates of relief is likely a step towards this.  

We prepare over one hundred R&D claims a year, ranging from start-up tech companies to billion dollar, listed groups with a global presence.

Our range of R&D Tax Incentives services includes:

• Fully outsourced R&D claim preparation.
• Assessing the impact of funding arrangements and commercial terms in relation to the relief available for specific projects.
• Developing methodologies for identifying and apportioning qualifying expenditure.
• Advising on grants, including the drafting of grant applications and modelling the interaction between grant support and R&D Tax Incentives, so that companies can assess the net support available under different options.
• Reviewing and advising on the impact of commercial terms where R&D will be undertaken as part of a contractual arrangement, which can have a significant impact on the R&D relief available.
• Reviewing and advising on the impact of changes in company ownership, VC investments and shareholder agreements on the R&D relief available.
• Liaising with Corporation Tax compliance and International Tax teams in order to understand the company’s wider CT position – this allows us to help the business to understand the options available in order to maximise the benefit of the R&D claim.
• Assisting the company to track and trace its R&D expenditure to enable a smoother transition to Patent Box claims once a project has been commercialised.
• Assisting the business with the accounting entries required to recognise the R&D claim.

We liaise closely with HMRC through the R&D Consultative Committee, an HMRC-sponsored forum that meets twice a year to discuss the operational delivery of the R&D tax relief schemes. This ensures that we are always up to date with any proposed changes in legislation, guidance or approach, and enables us to provide feedback to HMRC and the Government on any obstacles that our clients face in accessing the reliefs.