R&D Tax Relief is a generous scheme that gives you back up to 33% of your development costs as a reduction to your corporation tax bill or a cash credit. Here’s how to calculate how much you can claim.
The R&D Tax Credits scheme – also known as R&D Tax Relief – is a lucrative source of government funding, available to UK businesses.
Since its launch in 2000, it has paid over £40 billion in tax relief and cash credits across more than 500,000 claims.
The scheme works by reimbursing companies a percentage of their development expenditure. Here are the headline rates:
- Companies claiming through SME R&D Tax Relief can recoup up to 33.35% of their eligible expenditure
- Companies claiming through the RDEC scheme can claim up to 16.2% of their eligible expenditure
These are only the headline rates, though. Exactly how much your company can claim depends on three factors:
We’ll explore each of these factors below.
If you’re looking for an easy way to estimate your claim size, check out our R&D Tax Credits calculator. It will give you an estimate of your claim size in just a few seconds.
And if you want to make sure you’re claiming your full entitlement to relief, GrantTree’s R&D Tax experts are here to help. Just get in touch.
1. SME R&D Tax Relief, ERIS or RDEC
R&D Tax Relief is made up of three schemes:
- SME R&D Tax Relief
- Enhanced R&D intensive support (ERIS)
- The Research and Development Expenditure Credit (RDEC)
Each one offers different amounts of funding.
Maximum funding offered by each scheme
| Scheme | Before 1 April 2023 | From 1 April 2023 |
|---|---|---|
|
SME R&D Tax Relief |
33.35% |
21.5% |
|
ERIS Scheme |
- |
27% |
|
RDEC |
10.53% |
16.2% |
Which scheme should I apply to?
Very basically:
- If you are a large company, you’ll apply for RDEC
- If you are an SME, you should probably apply for SME R&D Tax Relief
- If you’re an SME that’s unprofitable and has invested heavily in R&D, you may qualify for the ERIS scheme
Working out which scheme you should apply to can get pretty complicated. It hinges on factors like whether you’ve won a grant and how much of your company is owned by other businesses. You may also need to apply for different projects under different schemes.
Here are a few resources that will help you work out which scheme to apply to:
If you’d like a hand, our R&D tax experts would be happy to help.
Just fill out one of our contact forms and we’ll call you right back.
2. Your company’s financial position
RDEC
If you’re applying for the RDEC scheme, you’ll receive a cash credit worth 10.53% on costs incurred before 1 April 2023 and between 15% and 16.2%–depending on your tax rate–after this date.
Enhanced R&D intensive support
ERIS provides a cash credit worth 27% of your qualifying expenditure. You can only receive ERIS on costs incurred on or after 1 April 2023.
SME R&D Tax Relief
If you’re applying for the SME scheme, the amount of funding you can claim depends on whether you’re profitable or loss-making.
| Financial Position | Relief Before 1 April 2023 | Relief From 1 April 2023 |
|---|---|---|
|
Loss-Making |
33.35% |
18.6% |
|
Breaking Even |
18.85% |
8.6% |
|
Profitable |
24.7% |
16.34% to 21.5% |
Your financial situation also determines how you will receive your funding. If you’re profitable, you’ll receive most, if not all, of your funding as a relief against your corporation tax bill.
If your company is unprofitable, you can surrender your loss for a cash credit or carry it forward to offset taxes on future profits.
Unfortunately, if you’ve broken even, you’ll have fewer losses to surrender, which means you’ll receive less relief—potentially as little as 8.6p per £1 of qualifying expenditure on investments made after 31 March 2023.”
3. Claim maximisation
The last factor affecting how much R&D Tax Relief you will receive is whether you have maximised your claim size.
R&D Tax Relief is a complicated scheme. It has lots of nuances and edge cases. For this reason, it’s easy to claim for less than your full entitlement by excluding eligible costs.
If you want to receive the maximum amount of R&D Tax Relief, you need to claim for every penny of eligible expenditure possible.
This means identifying all qualifying R&D and then combing your financial records to find every eligible cost related to direct and indirect activities.
The easiest way to do this is to work with an R&D Tax Credits specialist like GrantTree.
Our technical experts will isolate all valid R&D and explain it engagingly and accurately in a comprehensive technical report, addressing the crucial questions in your additional information form.
Meanwhile, our tax experts will ensure all of your eligible expenditure is incorporated into your claim, securing your company the most amount of relief possible.
Don't miss out on valuable funding
If you want to access your full entitlement of R&D Tax Relief without risking damage to your reputation with HMRC, GrantTree is here to help.
We have 12 years experience filing successful R&D Tax claims, securing more than £400 million for our clients across over 2,000 applications.
Whether you’re looking for help with a claim you’ve put together yourself or are looking for expert help preparing your submission from scratch, GrantTree’s R&D Tax experts can give you the support you need.
