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 Relief scheme is a generous 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.
For accounting periods starting on or after 1 April 2024
- Enhanced R&D intensive support (ERIS) – up to 26.97% of your qualifying expenditure
- The merged R&D expenditure credit (RDEC) scheme – up to 16.2% of your expenditure
For accounting periods starting before 1 April 2024
- SME R&D Tax Relief – up to 33.35% of your qualifying expenditure
- The old RDEC scheme – up to 15% of your qualifying expenditure
These are only the headline rates, though. In practice, the amount you can claim hinges on three factors:
- Which scheme you’re applying to
- Your company’s financial position
- Whether you’ve claimed all of your qualifying expenditure
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. Which scheme you apply to
As mentioned above, R&D Tax Relief is made up of four schemes:
- The merged scheme
- ERIS
- SME R&D Tax Relief
- The old RDEC scheme
Each one offers different amounts of funding.
Relief rates for each scheme
| Costs incurred before 1 April '23 | Costs incurred after 1 April '23 but in APs starting before 1 April '24 | Costs incurred in APs starting from 1 April '24 | |
|---|---|---|---|
| Old RDEC | 10.5% | 15% - 16.2% | - |
| Merged Scheme | - | - | 15% - 16.2% |
| SME R&D Tax Relief | 18.6% - 33.35% | 8.6% - 21.5% | - |
| ERIS | - | 26.97% | 26.97% |
Which scheme should I apply to?
If you’re claiming for an accounting period (AP) starting before 1 April 2024, your decision will be SME R&D Tax Relief or RDEC.
For APs after this date, it’s between the merged scheme and ERIS.
SME R&D Tax Relief vs RDEC
- If you’re a large company, you should claim under RDEC
- If you’re an SME, you should claim under SME R&D Tax Relief
- However, there are some cases where SMEs must claim under RDEC
Merged scheme vs ERIS
- Large companies and profitable SMEs must claim under the merged scheme
- Unprofitable SMEs must also claim under the merged scheme unless they qualify R&D intensive
- To qualify as R&D intensive, a company must spend at least 30% of its total expenditure on qualifying R&D costs
As you can see, working out which scheme to apply for can get pretty complicated. There are also cases where you will have to claim for different projects under different schemes.
If you’d like a hand, our R&D tax experts would be happy to help. Head here to request a call.
2. Your company’s financial position
Each of the regimes that make up R&D Tax Relief offer different amounts of funding depending on whether you are profitable, loss-making, or breaking even.
| Financial Position | SME Scheme | Old RDEC | New RDEC | ERIS |
|---|---|---|---|---|
|
Profitable |
16.34% - 24.7% |
10.53% - 16.2% |
15% |
- |
|
Breaking Even |
8.6% - 18.85% |
10.53% - 15% |
16.2% |
8.6% |
|
Loss-Making |
18.6% - 33.35% |
10.53% - 15% |
16.2% |
27% |
Most of these schemes offer a range of funding. That’s because it matters:
- When your costs were incurred. The relief rates of some regimes were reduced for costs incurred from 1 April 2023
- If you’re profitable, whether you are paying the main rate of corporation tax or the small profits rate
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.
