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). For accounting periods beginning prior to 1 April 2023, SMEs can claim a cash credit of up to 33p for every pound of eligible expenditure on in-house, unfunded R&D, and can receive a payable tax credit even if they are loss-making or pre-trading. 

Over recent Fiscal Events, the Government has announced a raft of changes to the R&D tax relief schemes, including changes to the rates of R&D tax relief available. 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. For expenditure incurred on or after this date, a company claiming under the SME scheme can receive relief of up to 27p for every pound of eligible expenditure incurred. The precise rate of relief available, which can range from 18.6p to 27p, will be dependent on the claimant company's circumstances and company tax return. With regards to the RDEC scheme, for expenditure incurred on or after 1 April 2023, the effective rate of relief will be 15p for every pound of eligible expenditure incurred.

The Government is currently consulting on whether the SME and RDEC tax credits scheme should be consolidated into one R&D tax relief scheme (similar to other R&D regimes internationally), with implementation expected from 1 April 2024.

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 tax credit claim preparation including support with the claim notification form.
• Assessing the impact of funding arrangements and commercial terms in relation to the relief available for specific projects, as well as evaluating how corporation tax relief supports companies better.
• 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 corporation tax liability – 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 tax relief claims.

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, tax credits, 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.