Does size make a difference?
The amount of R&D tax incentives available is different for small and medium-sized enterprises (SMEs) and Large companies. For R&D claims purposes:
- SMEs are classed as organisations with under 500 staff and EITHER:
- A turnover of no more than 100 million Euros
- No more than 86 million Euros in gross assets.
- Large companies are classed as organisations having EITHER 500 or more staff; OR
- A turnover of more than 100 million Euros
- More than 86 million Euros in gross assets.
Generally, SMEs claim R&D tax credits or R&D tax relief and Large companies claim Research and Development Expenditure Credits (RDEC). However, SMEs may be eligible for RDEC if they cannot claim R&D tax credits or R&D tax relief under the SME regime.
SME R&D incentives benefit
The Governments R&D incentives regime can be worth up to 33% of a SMEs R&D expenditure. However, the actual support will vary depending on whether you are profit-making or loss-making, and your Corporation Tax position.
Profit Making SMEs
You can receive tax relief on your corporation tax of 25% of your qualifying R&D expenditure. That’s a reduction of £2,500 from your tax bill for every £10K you spend on R&D activities.
Loss Making SMEs
Are you a loss-making business with high R&D costs? You could be in line for up to 33% of your expenditure in the form of cash credit. That means you could receive over £3.3k for every £10k you spend on R&D.
Remember, much more can be claimed as R&D than you might have expected. Check what support you could be owed for your R&D with our tax credit calculator.
Large company RDEC benefit
If you are a large company, or an SME unable to claim under the SME regime, you may be eligible for RDEC support. This is a cash or tax benefit of almost 10% (after-tax) or 10p per £1. This means that for every £100k you spend on qualifying R&D expenditure, you can either receive a £10k tax reduction or if you are a loss-maker, receive this support as £10k of cash. Unlike the SME regime, the net benefit doesn’t change whether you are making a loss or making a profit.
SMEs who cannot claim R&D tax credits due to being grant-funded projects may also be eligible for RDEC support. Find out how much RDEC support you could be owed using our tax credit calculator today, or get in touch with us for more detail.