Claiming R&D Tax Credits if Your Company is a SME

 Research & Development (R&D) tax credits are a hidden gem from HMRC that many may not be aware of, essentially, they are a way of companies being able to claim back on expenses which go towards R&D activities. These activities can be of numerous nature and from any sector, the chance for claiming back on them is extremely high.

What expenses can you claim on?

A multitude of operational costs can be claimed on, including:

-          Staffing costs

-          Subcontracted R&D

-          Externally provided workers

-          Consumables (including water, fuel, and power)

-          Software

-          Payments to the subjects of clinical trials

The majority of the above costs are found in every sector and, as such, the only requirement here is that the work is linked to R&D.

Defining R&D

Research & Development within a company incorporates either the change of an existing product, process or service or, alternatively, the creation of new ones via technology. Such a definition is left intentionally broad by HMRC so that many businesses are able to claim it.

Now, you might be thinking that such a scheme is open purely to large corporations making huge advances in their sectors. Thankfully, this is not the case.

An SME is defined as a company with less than 500 employees and either has a turnover of less than 100 million euros or a balance sheet total of less than 86 million euros. When working out if your company is a SME then you also need to consider linked companies and partnerships. Many start-ups will also be classed as a SME under HMRC’s definition.

Types of SME R&D Tax Credits

Two types of R&D relief are available to companies, being:

-          SME R&D Relief

-          R&D Expenditure Credit (RDEC)

RDEC is a tax credit available to both large and SME companies. It is a scheme largely aimed at large companies; although if a SME is subcontracted to do R&D work by a large company then they will also be eligible to claim this type of relief. From the first of April this year, it involves a rebate of 13% of any qualifying R&D expenditure.

SME R&D relief allows companies to subtract an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction. The business can also claim a tax credit if it is loss making, worth up to 14.5% of the loss.

Conclusion

In short, SME R&D tax credits are a great way for SMEs to claim back on eligible expenses that they might not have been aware of before. If you’re unsure of the precise nature of what to claim on, or if you don’t have the time available to work this out and process claims with HMRC then Areande can provide a comprehensive service whereby they will liaise with HMRC on your behalf, making the whole process stress-free for yourself whilst saving you time and money in the long-run.