How much
is an R&D
claim worth?
The UK Government is committed to supporting and rewarding UK companies that invest in scientific and technological innovation. As a result, Research & Development (R&D) tax incentives have been structured to provide a valuable cash injection to businesses who invest in R&D.
The cash value of your claim will ultimately be determined by the amount of qualifying costs identified and which R&D incentive your projects can be claimed under – the Small and Medium Enterprise (SME) incentive or the Research and Development Expenditure Credit (RDEC) incentive.
We will always undertake a detailed analysis of your company to ensure that the R&D claim is made under the correct incentive.
The SME incentive is worth up to
c.33p on every £1
of qualifying costs identified.
The RDEC incentive is worth up to
c.11p on every £1
of qualifying costs identified.
SME incentive
Who can claim? - The threshold test.
To claim under the SME incentive, your worldwide group must have:
How does it work?
An R&D claim will create an additional deduction against your taxable profits, which would not be available without undertaking the R&D claim, worth 130% of the qualifying costs identified. For example:
If you are profitable, this deduction will reduce your corporation tax payable.
If you are loss-making, a proportion of your taxable losses can be surrendered to the government for a tax credit cash repayment. The losses can also be used to reduce the corporation tax payable by your company in previous years, your UK group in the current year and both your company and your UK group in the future.
What is it worth?
The exact cash value of your claim will depend on your company’s taxable position and the type of cash benefit taken as a result of the claim.
Taxable profit
Qualifying R&D Expenditure
x130%
R&D Enhancement
x19%
Corporation Tax Saving
£100k
£130k
£24.7k
£100k
£130k
£230k
Loss surrendered
£33.35k
Loss Making
Qualifying R&D Expenditure
x130%
R&D Enhancement
Enhanced R&D Expenditure
x14.5%
Tax credit
RDEC incentive
Who can claim?
The RDEC incentive is primarily for large companies who have not passed the SME incentive threshold test.
Certain SMEs may need to claim a proportion of their costs under the RDEC incentive in specific situations. This includes where they have received external funding for R&D via grants or subsidies.
What is it worth?
In general, the value of an RDEC claim remains the same whether you are profitable or loss making.
Over recent years, the value of an RDEC claim has become more beneficial to companies. As at 1 April 2020 it is worth:
If you are profitable, an RDEC will
reduce your corporation tax payable
If you are loss-making, an RDEC can be surrendered to the government for
a tax credit
cash repayment
RDEC
Qualifying R&D Expenditure
x13%
R&D Above line credit
-19% Corporation tax
Total credit
£100k
£13k
£10.53k
How does it work?
The RDEC incentive has different mechanics to the SME incentive, with slightly different rules of what costs can be included, but it ultimately works in a similar manner: