In data recently released by HMRC, more than 52, 000 small and medium-sized companies claimed R&D tax credits for the 2018-19 tax year. They noted that the total relief claimed was near £6 billion, and half of that came from these smaller businesses.
In comparison to prior years, this shows a 19% increase in small businesses claims. While that number is promising, it still suggests that many small firms are not taking advantage of this tax credit.
The government has also stated their commitment to £22 billion in R&D relief by 2024-25. That’s a big jump from £6 billion to make in just 6 years. With that commitment in mind, small businesses should really take a look at this tax credit and see if they qualify.
SMEs who performed qualifying R&D are actually eligible for two forms of relief. They can apply an additional 130% of qualifying expenditure in addition to the typical claim. Yes, an SME could qualify for 230% in relief to be used against taxable profits.
A qualifying SME would have fewer than 500 employees and a turnover below £86 million. The R&D needs to aim to advance the field of science or technology and should encounter technical uncertainty throughout. Even if your project didn’t come to fruition, you might qualify. And fret not, if you are just hearing of this tax credit, you can claim this tax relief up to two years from the end of the accounting period that a project was conducted in.