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SME R&D tax credit scheme

What is SME R&D tax relief?

Historically SMEs could claim back up to 33% of the amount they’ve spent on qualifying R&D. Between the 1 April 2023 and the 31 March 2024, this will reduce to a maximum of 18.6% for loss making companies, increasing to 27% if the company is R&D intensive (defined as their qualifying expenditure represents 40% or more of their total expenditure).

For expenditure incurred on or after 1 April 2023 the enhancement rate reduced to 86% (from 130%) and the tax credit rate reduced to 10% (from 14.5%). There is an exception for R&D intensive companies who can continue to claim a tax credit at 14.5%.

For accounting periods starting on or after 1 April 2024, the SME scheme will be merged with the RDEC scheme. At that point, the notional tax rate applied to loss-making companies will be 19%. However, there is an enhanced rate for R&D intensive SME businesses, those whose qualifying expenditure is 30% or more of their total expenditure.

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85,300+

SME claims projected by HMRC for 2020-21*

£53.7k*

The average claim under the SME scheme projected for 2020-21*

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to find out how you can make the most of your innovation

How Source Advisors can help you claim an SME R&D tax credit?

It takes an experienced eye to identify the full potential of your claim. We will give you an expert who knows about your industry and speaks your language. They get to know your business so that they can identify what you do to develop and innovate your products or services.

It is then a question of preparing the claim. We know what HMRC is looking for, so we can ensure your claim is optimised and robust – which gives you the best chance of having your claim approved.

We manage your claim from start to finish – scoping, registering the claim, handling queries from HMRC, and handling the accounting treatment.

We work with you to make the claims process as seamless as possible – simply put, we will do the work and you will get the benefit.

FAQs

To start with you need to be a UK limited company and subject to UK corporation tax to qualify for the SME scheme. A company does not have to be paying corporation tax it can be in a loss position and still make a claim.
You are classed as a small or medium sized enterprise (SME) if you, and your connected companies, employ fewer than 500 employees with either an annual turnover under €100 million or a balance sheet under €86 million.

You cannot claim SME tax relief on a project if:

  • Your R&D is subsidised
  • You have applied for, or are receiving, State Aid for your R&D projects
  • You are subcontracted by a larger company
  • You are no longer a “Going Concern”

In these cases you may be able to claim under the RDEC scheme. Talk to us to find out more.

If your company has been undertaking qualifying R&D activity and has not yet claimed R&D tax relief, you can currently make a claim for a tax return period that has already been filed with HMRC, as long as it is within two years after the end of the accounting period.

For accounting periods starting on or after 1 April 2023 if you have never claimed R&D before you will need to, either; notify HMRC of your intention to make a claim (within 6 months of the end of the accounting period) or ensure your claim is submitted to HMRC within 6 months of the accounting period end.

Bear in mind that the accounting period isn’t necessarily the same as the tax return date.

We will do the heavy lifting to put your claim together.

The technical and financial reports explain how your project:

  • Looked for an advance in science or technology and aimed to achieve this advance
  • Had to overcome scientific or technological uncertainty
  • Could not easily be worked out by a professional in the field

From 1 April 2021, HMRC introduced a cap on the amount of R&D tax credit that will be paid to a loss making SME. The R&D tax credit will be capped at £20,000 plus three times the total PAYE and NIC liability of the company for the year. A company making a claim for a payable R&D tax credit of less than £20,000 will not be impacted by the cap.

If your benefit would be a reduction in payable corporation tax (or refund of tax already paid) you won’t be affected.

An R&D intensive business is defined as a loss-making SME whose R&D expenditure constitutes at least 40% (for expenditure incurred on or after 1 April 2023) or 30% (for accounting periods beginning on or after 1 April 2024) of total expenditure.

And even if you’ve made a claim already

With over 8,500 claims successfully processed, we have delivered over £350 million in claim benefit for our clients. Source Advisors optimises claims through an expert led, detailed assessment of your activities.

When you sign up with Source Advisors you know that you will be in safe hands, and not just for the future. One of the first things we’ll be able to do is go back for two years to do all we can to improve your claims and reports. So that opportunity isn’t lost.

Find out what makes Source Advisors different.

Ensure your business recognises and receives the full credit it is due with Source Advisors IP services

The Patent Box is closely linked with R&D tax relief and a company can often claim tax relief under both schemes.

Source Advisors can offer you advice to best manage your intellectual property and optimise your claims across both schemes. Find out more about our IP consultancy services including Patent Box.

Contact us
to find out how you can make the most of your innovation

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