Strategy, Tax 14th August 2023

Are you missing out on SME R&D Tax Relief?

Cracking the code of SME R&D Tax Relief

In the bustling world of business, Small and Medium Enterprises (SMEs) are the driving force behind progress. Amid the intricate web of finances, SMEs can discover a valuable gem known as Research and Development (R&D) tax relief. Today, we’ll delve into expert insights shared by Eastfield Accountants, shedding light on how SMEs can unlock the benefits of this opportunity.

At its essence, SME R&D tax relief is designed to incentivise businesses to invest in innovation. It’s a means for companies engaged in qualifying research and development to receive financial support. This relief can either alleviate tax liabilities or provide a direct cash injection, depending on the financial standing of the company.

Recent amendments have redefined the landscape. Previously, SMEs could claim up to 33% of qualifying R&D expenses. As of April 1, 2023, these percentages have been restructured. Loss-making companies can now claim up to 18.6%, while R&D-intensive companies have the potential to claim up to 27%.

Could you qualify? Ask yourself:

  • Are you engaged in designing and developing new products?
  • Do you seek to enhance processes, services, or materials?
  • Is there involvement in creating prototypes or conducting testing?
  • Are software or IT solutions a part of your development?
  • Have you invested in projects or products that faced setbacks?
  • Do you employ individuals with technical or scientific expertise?

Claiming and evidence

For qualifying R&D activities that haven’t been claimed, you can file within two years after the end of an accounting period. Commencing April 1, 2023, if you’ve never claimed R&D before, you should notify HMRC within six months of the accounting period end.

Eastfield Accountants aid in compiling essential evidence, outlining your projects’ progress, uncertainties, and the specialised knowledge applied.

Unlocking potential

While loss-making SMEs have caps on R&D tax relief, the payable credits won’t exceed £20,000 plus three times the total PAYE and NIC liability. Claims below £20,000 remain unaffected.

In an era where innovation reigns supreme, SME R&D tax relief emerges as a golden opportunity. By embracing these incentives, businesses pave a path to sustained growth, where innovation and financial success intertwine. With the guidance of experts, businesses ensure their claims optimise compliance, empowering innovation while navigating the intricacies of taxation.

If you would like to unlock growth with SME R&D tax relief, call us on 01603 320780 to maximise your benefits today.