Overview of Research and Development (R&D) Relief for Corporation Tax
Date: 11th August 2014
The Research and Development (R&D) Relief is a Corporation Tax (CT) relief that can reduce the company’s overall tax bills. If a company is a small or medium size business, you can choose to receive a tax credit.
How it began?
The R&D tax relief was announced in the year 200 for small and medium business enterprises and a separate scheme for corporations and large business which was introduced in 2002. The scheme was a result of the UK government’s intention to increase R&D based out of UK by helping in reduce the cost of R&D and fuelling investment in R&D.
There are two main types of R&D incentive structure:
- Volume-based (credit based on absolute volume of R&D expenditure)
- Incremental-based (credit driven by the increase in R&D spending over a base figure)
The UK scheme is volume based as it provides an incremental approach.
Who are eligible?
1. SME (Small or Medium size business) scheme:
- 225% of qualifying expenditure, a 125% uplift
- Before 31st March 2011 the rate is 175%, & 1st April 2011-31st March 2012 it is 200%
(Note: Cash credit available in loss making situations.)
- SME subcontracted R&D cannot be claimed except when an SME executes work for a large company in which case it can claim at the large company rate
- An SME with a grant relating to R&D can only claim the subsidised expenditure at the large company rate
2. Large Company Scheme:
- There has to be an employee count of over 500
- Turnover exceeding €100 million
- Balance sheet exceeding €86 million
- 130% of qualifying expenditure, a 30% uplift
(Note: Also there is “NO” cash credit available in loss making situation.)
To know more about R&D tax relief visit www.randdtax.co.uk