What Are Research & Development (R&D) Tax Credits?
R&D tax credits enable SME companies that incur costs in developing new products, processes or services to receive a cash payment or tax deduction.
This checklist will help you see if you are eligible:
- I have a limited company based in the UK
- I employ less than 500 people
- My turnover is less than £85 million a year
- I'm working on something new and different and think my competitors would use it if they could
Where an SME incurs expenditure of £100,000 on qualifying R&D, it can deduct £230,000 when calculating its taxable profit, or loss, for corporation tax purposes. As the £100,000 would already be accounted for in its accounts, the balance of £130,000 would be an additional deduction from its taxable profit and the corporation tax saving would be £26,000 (at a corporation tax rate of 20%). The equivalent of the company receiving 26p from HMRC for every £1 they spent on R&D activities.
Blackman Terry has had great success with claiming R&D tax credits. One client told us they "were thrilled and surprised with the size of the cheque they received from HMRC".