SR&ED Features

Research and development (R&D) helps companies improve profits and grow by creating new high value-added products, processes and services.

The R&D tax credits help companies to invest more in R&D either by reducing a company's tax bill or, for some small or medium sized companies (SMEs) not in profit, by providing a cash sum. The R&D tax credits are available to companies throughout the UK.

R&D Tax Credits are the biggest single funding mechanism for business R&D provided by Government. Developed through consultation with business they are at the heart of the Government’s strategy to raise levels of business R&D and encourage business innovation.

The cost of support claimed increased from £0.4bn in 2002/03 to £0.5bn in 2003/04 and £0.6bn in both 2004/05 and 2005/06; more than 6,000 claims were received in both 2004/05 and 2005/06. In total, more than £2.3bn of support has been given to business R&D through R&D tax credits in the six years since their introduction in 2000.

In 2005/06 R&D tax credits were claimed against over £6.7bn of business R&D expenditure. Of this total, expenditure under the SME scheme totalled £1.01bn and claims including cash back and tax deduction totalled £0.18bn; total claims thus equated to about 18% of this expenditure. Expenditure under the large company scheme totalled £5.7bn and claims £0.43bn; claims equated to about 7.5% of this expenditure.

Even so, many UK companies miss out on this incentive. They do not appreciate that they are performing R&D for which they can claim - or that the claiming process is straightforward.

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