R&D Tax Relief for Small and Medium-Sized Enterprises (SME)

The UK government offers the SME R&D tax relief scheme to incentivise small and medium-sized enterprises to engage in research and development. This is like a discount on the amount of money it spends on R&D.

R&D tax relief is available to all businesses, regardless of their size. However, Small and medium-sized enterprises (SMEs) are eligible for a more generous scheme than larger businesses.

Small and Medium-Sized Enterprises (SME)

Small and Medium-Sized Enterprises (SMEs) in the UK are businesses with few employees and a modest turnover. It has an employee headcount of less than 500, a turnover of not more than ￡100 million, or a balance sheet total of less than ￡86 million.

These businesses often face unique challenges, including access to finance, regulatory compliance, and market competition. The UK government provides support and incentives to help SMEs thrive and contribute to economic growth, innovation, and job creation.

Qualifying costs for SME R&D tax relief include:

• Salaries and wages of employees who are directly involved in the R&D project,
• Cost of materials and consumables used in the R&D project,
• Cost of external consultants and contractors who are directly involved in the R&D project,
• Cost of software and equipment that is used exclusively for the R&D project.

Click here to find out if your project and expenses qualify for the R&D tax relief now!

How Much Small and Medium-Sized Enterprises Can Claim Under Ramp;D Tax Relief Scheme?

Expenditure Before April 2023:

Before April 2023, the R&D SME Scheme permits companies to claim a generous tax relief of 33% of their qualifying R&D expenses. This advantageous rate arises because SMEs that make a profit can deduct an additional 130% of qualifying R&D costs from their annual profits. This 130% supplement is in addition to the usual 100% deduction, resulting in a total deduction of 230%.

Even if you are a SME and your business is not making a profit, there is no need to worry!

Even if your company is making a loss, you can still claim a tax relief of up to 14.5% based on the loss that can be surrendered.

Changes Effective from April 2023:

Starting from April 1, 2023, there have been significant alterations to the R&D tax relief scheme. For expenditures made on or after this date, the supplementary deduction for SMEs has decreased from 130% to 86%. The SME R&D Tax Credit rates have also reduced from 14.5% to 10%.

However, it is worth noting that if your company falls under the loss-making category but is classified as R&D intensive (where qualifying R&D spending accounts for at least 40% of the total expenditure), you are still eligible to claim using the 14.5% credit rate.

Conclusion

SMEs in the UK have an excellent opportunity to leverage R&D tax relief to boost innovation and profitability. While the rates change from April 2023, valuable incentives are still available.

To secure your slice of this financial boost, navigate the rules diligently and make your claim count. Act now to maximise your refund and supercharge your R&D efforts. Do not miss this crucial support—start your claim confidently with our R&D experts!