Types of UK R&D relief

There are 2 different types of R&D relief depending on the size of your company and whether the project has been subcontracted to you or not.

Small and medium-sized enterprises (SME) R&D Relief

Do you Qualify?

You can claim SME R&D relief if you are an SME with:

  • less than 500 staff
  • a turnover (revenue) of under €100m or a balance sheet total (assets) under €86m

Note: You will need to consider associated companies and partnerships when you determine if you are an SME.  If your company has external investors, this can affect your SME status.

You cannot claim SME R&D relief if:

Advantages of SME R&D relief:

It allows companies to:

  • deduct an extra 130% of their qualifying costs from their annual income, as well as the normal 100% deduction, to make a total 230% deduction
  • claim a tax credit if the company is in a loss position, worth up to 14.5% of the net loss

What Costs you can claim:

You can claim certain costs on the project from the date you start working on the uncertainty until you develop or discover the advance or the project is completed.

Payroll costs:

For staff working directly on the R&D project, you can claim a proportion of their:

  • salaries
  • wages
  • Class 1 NICs (National Insurance Contributions)
  • pension fund contributions

You can claim for administrative or support staff who work to directly support a project. For example, human resources used to recruit a specific person to work on the project. You cannot claim for clerical or maintenance work that would have been done anyway like managing payroll.

You can claim 65% of the payments made to an external agency if they provided staff for the project.

Subcontractor costs:

You can claim 65% of the costs of using a subcontractor for your R&D activities.

Consumable items:

  • materials
  • Utilities

Costs that cannot be claimed:

  • the production and distribution of goods and services
  • capital expenditures
  • the cost of land
  • the cost of patents and trademarks
  • rent or rates

Research and Development Expenditure Credit

Large companies (companies who do not meet the definition of SME) can claim a Research and Development Expenditure Credit (RDEC) for R&D projects.

It can also be claimed by SMEs and large companies who’ve been subcontracted to do R&D work by a large company.

The RDEC is a tax credit of 11% of your qualifying R&D expenditure up to 31 December 2017 and 12% from 1 January 2018.

What Costs you can claim:

Payroll costs:

For staff working directly on the R&D project, you can claim a proportion of their:

  • salaries
  • wages
  • Class 1 NICs (National Insurance Contributions)
  • pension fund contributions

You can claim for administrative or support staff who work to directly support a project. For example, human resources used to recruit a specific person to work on the project. You cannot claim for clerical or maintenance work that would have been done anyway, like managing payroll.

You can claim 65% of the payments made to an external agency if they provide staff for the project.

Subcontractor costs

Subcontracted expenditure cannot be claimed unless it is directly undertaken by:

  • a charity
  • a higher education institute
  • a scientific research organization
  • a health service body
  • an individual or partnership of individuals

Consumable items

  • materials
  • Utilities

Costs that cannot be claimed

  • the production and distribution of goods and services
  • capital expenditure
  • the cost of land
  • the cost of patents and trademarks
  • rent or rates

To schedule a no obligation consultation

Learn More about the UK R&D Program & How EVAMAX can help Maximize benefits through the program

For assistance in preparing your submission and to position your application for approval contact EVAMAX Group to help you with the process. You may also email us at info@evamax.com or call 1-877-711-7733.