Benefits

Research and development (R&D) tax credits are a company tax relief which can either reduce a company’s tax bill or, for some small or medium sized companies, provide a cash sum.

The R&D tax credit works by allowing companies to deduct up to 150% of qualifying expenditure on R&D activities when calculating their profit for tax purposes. Companies which are SMEs can, in certain circumstances, surrender this tax relief to claim payable tax credits in cash from the HM Revenue & Customs.

What are the benefits?

SME scheme

  • 150% rate of enhanced deduction
  • Payable credit of up to £24 for every £100 of qualifying expenditure on R&D
  • Company can claim for expenditure on R&D it sub-contracts to others
  • Claim can be reduced if the R&D project is subsidised or a grant is received in respect of it

Large company scheme

  • 125% rate of enhanced deduction
  • Company can only claim for expenditure on R&D it carries out itself, unless it sub-contracts R&D to certain qualifying bodies, individuals or partnerships of individuals
  • Company can claim for contributions to independent research

Your rate of return is dependant on many factors, including your company's taxable income, ownership structure, and types of R&D expenditures (e.g. labour, materials, capital) incurred. Our R&D calculator can help you determine the potential tax credits which you may receive for your R&D investment.

Are you getting your share?

The aim of the tax credits is to encourage greater R&D spending in order to promote investment in innovation. By early 2006 about 22,000 claims had been made, just over 19,000 of which were made under the SME scheme and just under 3,000 of which were made under the large scheme, amounting to almost £1.8 billion of support claimed through both schemes.

Instead of taking advantage of this source of cash, many companies do not file claims due to lack of time, resources or expertise needed to identify eligible expenditures and comply with the complex criteria defined by HMRC. Even those who do file R&D claims often do not take full advantage because they only capture the obvious R&D activities and miss others, such as related activities conducted at the "shop-floor" level.

The bottom line ...

Whether your company is large or small, in the manufacturing, software, or high-tech industries, these tax incentives can apply to you.

Taking advantage of these credits means you could:

  • Obtain investment tax credits on qualifying expenditures through a cash refund, a reduction in taxes payable, or both
  • Consider these financial benefits in longer-term R&D planning

Global R&D specialists have helped guide many Canadian business through the process of claiming R&D tax credits.

  • Our consultants have many years of experience, knowledge of the regulations, and extensive experience with the audit process.
  • Our goal is to de-mystify and simplify what can be a complex and time consuming process for many companies, allowing management to focus on what's most important - their core business.
  • Our job is to ensure that our clients get their share.

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