R&D Tax Credits

A government reward scheme for those leading the way in scientific and technological innovation

If you are a small business taking the risk to develop new products, processes or services – or even just improve existing ones –  then you may be rewarded as a leader of innovation; particularly where scientific or technological advances will be achieved with your work.

What do R&D Tax Credits really mean?

The UK Government is looking to encourage an innovative outlook in business by rewarding those who apply cutting-edge thinking to their product and service development.  This is particularly relevant if you are taking the risk and spending money without the guarantee of a positive outcome.

The tax relief is the equivalent of up to 33p for every £1 of qualifying expenditure and can be claimed instead of, or alongside, innovation grants for research and development funding too.

The average claim in the first year is £40k.  And most first-time claimants have the benefit of being able to submit a claim for the previous two completed year ends as well.

What is the criteria?

The SME scheme is relevant to all small businesses who carry out research & development and have fewer than 500 employees (FTE). In addition, your business must either have a revenue of less than €100m or balance sheet assets of less than €86m.

R&D tak credits
R&D tak credits

Does my business qualify?

  • The company must be a UK limited company
  • It must have paid either Corporation Tax or National Insurance and PAYE
  • For any R&D project to be valid, the company must have taken a financial risk
  • All R&D projects undertaken must be truly innovative
  • The project must be seeking to achieve a scientific or technological advance on what is currently available in the market

The main industries covered by the tax relief scheme are those in software, technology and manufacturing. But, in reality, anyone using innovation to produce a product or service is eligible.

The good news is that failed R&D projects can also be included in a claim, as well as the work of sub-contractors delivered as part of the project.

How worthwhile are the benefits?

These rewards have the potential to benefit a lot of small businesses, either by reducing your tax bill or providing you with cash credits as a proportion of your R&D expenditure. This means that you can off-set any losses as a result of R&D investment against a cash R&D tax credit, paid by HMRC, meaning you may not have to carry forward a loss in any one year.

Under the scheme, the rate of R&D tax relief can be as high as 24%. But do your research. There are varying schemes to suit different business types, ensuring that you can maximise your returns.

R&D tak credits

Don’t miss out

The truth is that a lot of small businesses are missing this opportunity either because they don’t believe they do research and development or are intimidated by the application process.

It is an area of funding that is hugely neglected in the UK. But for a lot of SMEs, there is money to recover under the R&D umbrella.

Read more about it here UK Research and Development Tax Credit Scheme.

Take advantage of our free appraisal service

Pegasus can complete a full appraisal to assess your eligibility for the scheme, without any upfront cost or obligation.

Let us improve your cash flow by helping you to raise funds through this valuable government initiative.