R&D Tax Credits

Many small businesses worry about innovating because of the sheer cost of it. Even if they have identified better processes or technologies to implement in their sector, the risk often seems a little too great. The vast majority of businesses don’t realise that they would be able to claim on these expenses under the Research & Development tax credit scheme. The scheme, which started in the year 2000, has seen over 170,000 claims and £16.5 billion in tax relief claimed by 2016, however it is believed that this is just a small fraction of R&D that could be claimed for by UK companies.

In 2015-2016 over 26,000 claims were made for tax credits, the lion’s share of these being made by SMEs with nearly 22,000 claims. However large companies certainly aren’t missing this opportunity as they claimed the most money owing to their claims being larger in value.


R&D claims based on industry

R&D claims based on industry

So, what can we claim on? Any project that makes an advance on science or technology can be claimed on, it doesn’t matter if the project fails it’s purpose or the product is never taken to market, it can still be claimed on. Some companies may even be entitled to a cash payout if they made an overall loss or hadn’t paid enough tax to claim against that year.

The benefits are better for small and medium sized businesses, as they can deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction.

By now I bet you’re wondering, “Ok what’s the catch, there’s no such thing as a free lunch”. Well the government realised that money invested in research and development would strengthen the UK economy and lead to future industry, so eat up!

“R&D tax credits are a tax relief designed to encourage greater R&D spending, leading in turn to greater investment in innovation. They work by either reducing a company’s liability to corporation tax or by making a payment to the company.”
Research and Development Tax Credits Statistics September 2017 report


CLICK HERE for more info on how to claim R&D tax credits from the gov.uk, or read this report for a better idea of what is being claimed for.


Tom Macpherson-Pope
Fab Lab Manager @ The Making Rooms