Simply, R&D Tax Credits are a tax break put in placeby the UK Government in 2000, aiming to encourage companies to spend more on R&D in the UK, becausethe UK believes it is advantageous to the UK economyto encourage UK companies to spend more on R&D.

In practice, SMEs 1 both profitable and loss-making can get back up to 33% of the amount they’ve spent on qualifying R&D.2 Large companies 3 can get up to 10% of their R&D refunded.

The money is paid as a corporation tax refund, or as a negative corporation tax, after the end of the financialyear, tax free, and can be used for anything – hiringmore developers, buying equipment, or even payingout dividends.

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R&D Tax Credits create a positive cycle of investment

tax-credit-diagram

*R&D costs can include: Subcontractor costs, technical analysis, management, testing, prototyping, developing manufacturing processes, software licenses, supporting software/SaaS, and part of hardware costs.

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  1. A company with less than 500 employees and either a turnover under €100m or assets below €86m; more info here; see also this article if you’re part of a group
    Link for ‘here’ : https://granttree.co.uk/whats-an-sme-for-tax-credits-and-grants/
    Link for ‘this article if you’re part of a group’: https://granttree.co.uk/the-importance-of-being-autonomous

  2. This is a term HMRC uses to refer to R&D that fits their specific criteria involving “advances in science and technology” and “technological uncertainty” – more on that later

  3. A company with more than 500 employees or with both turnover over €100m and assets above €86m

    The money is paid as a corporation tax refund, or as a negative corporation tax, after the end of the financial year, tax free, and can be used for anything – hiring more developers, buying equipment, or even paying out dividends.

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