What the relief is 

Research and Development (R&D) tax relief issupports availablecompanies forthat smallwork andon medium-sizedinnovative enterprisesprojects (SMEs)in withscience anand accounting period that starts before 1 April 2024. technology.

IfYou yourcannot accountingclaim periodif beginsthe onadvance oris afterin:

• the 1arts
• humanities
• social Aprilsciences, 2024,including youeconomics

Small can claim under the Research and Developmentmedium-sized mergedenterprise scheme.

The(SME) R&D tax relief

This fortax SMEsrelief allows your company to: to:

• deduct an extra 86% of your qualifying costsexpenditure from your trading profit for tax purposes, as well as the normal 100% deduction, to make a total of 186% deduction deduction
• claim a payable tax credit if the company has claimed relief and made a loss loss

The payable tax credit is worth up to:

• 10% of the surrenderable loss loss
• 14.5% of the surrenderable loss if the company meets the intensity condition

Unless foryou’re expenditureexempt onfrom orthe afterPAYE 1(Pay AprilAs 2023 (readYou howEarn) tocap, meetyour thetax intensitycredit conditionclaim sectioncannot ofbe thisover guide)  the cap.

Projects

To thatmeet dothe notintensity qualify 

condition

YouYour cannotrelevant R&D expenditure claim(plus thisthat taxof reliefthe forrelevant R&D expenditure aof projectany if: 

• it’sconnected incompanies), themust arts,be humanitiesat orleast social40% sciencesof (includingyour economics) 
• you’vetotal receivedrelevant R&Dexpenditure relief,(plus vaccinesthat researchof reliefany orconnected both,companies).

  Only totallingtrading morecompanies thanchargeable 7.5to millionUK eurosCorporation forTax it

• you’ve(or receivedcompanies anyeligible otherto Stateclaim aidrelief (excludingfor thepre-trading SMEexpenditure taxunder relief)section for1045 it
• it’sof forCorporation workTax subcontractedAct to2009) can you 
• it’shave subsidisedrelevant R&D expenditure.

  For inaccounting someperiods otherbeginning way,on foror exampleafter by1 aApril grant,2024

  The butSME youscheme maywill be ablereplaced toby claimenhanced onR&D theintensive partsupport. thatThis is notonly subsidised 

Findavailable outto ifloss-making you can claim R&D expenditureintensive credit insteadSMEs.

WhoCompanies that can claim claim

ToYou can claim R&D tax relief forif SMEs,you’re youra companySME must have: with:

• less than 500 staff staff
• a turnover of under 100 million euros or a balance sheet total under 86 million euros
• an

If accountingyour periodcompany beginninghas beforeexternal 1investors, Aprilthis 2024 

Youcan mustaffect includeyour theSME staff,status. turnoverYou andwill balanceneed sheetsto ofinclude anythe figures of linked orand partner companiesenterprises in your total when you work out if youyou’re cana claim R&DSME tax relief for SMEs.

Linked and partner enterprises 

You’llThe need to include a proportion of the staff, turnover and balance sheets of partnerany or linked enterprises.or Thispartner enterprises should be basedincluded onin theyour percentage of voting rights and capital that connects the enterprises. total.

For example, if you own 30% of another enterprise you should include 30% of its staff, turnover and balance sheets when calculating if you’re a SME. 

Linked enterprises enterprises

Your company is linked to another one if: if:

• it holds over 50% of the voting rights in another enterprise enterprise
• another enterprise holds over 50% of the voting rights in your company company
• it has other rights which allow it to control another enterprise enterprise
• another company has other rights which allow it to control your company company
• your company and another enterprise are both controlled by another party party

Partner enterprises enterprises

You have a partner enterprise if: if:

• another company holds 25% or more of your voting rights or capital capital
• you hold 25% or more of another enterprise’scompany’s voting rights or capital

How

You will need to meetinclude a proportion of the intensitystaff, condition 

turnover and balance sheets of partner companies. This should be based on the percentage of voting rights and capital that connects the 2 companies.

AFor example, if you own 30% of another company meetsyou should include 30% of its staff, turnover and balance sheets when calculating if you’re a SME.

When you cannot claim

You cannot claim the intensitytax conditionrelief if: for a project if:

• it’syou’ve claimingreceived forState anaid accountingtotalling periodmore beginningthan before7.5 1million Aprileuros 2024for andthe endingproject
• you’ve onreceived orany afterother 1State Aprilaid 2023 (excluding the SME tax relief) for the project
• itsit’s relevantfor R&Dwork expendituresubcontracted isto atyou
• it’s leastsubsidised 30%in ofsome itsother totalway, expenditurefor (includingexample thatby ofa anygrant, connectedbut companies)  

Youyou willmay needbe able to meetclaim on the conditionpart forthat theis periodnot forsubsidised

Find whichout theif you can claim isR&D made.expenditure credit instead.

The

Check periodswhen costs qualify

Before you needmake a claim for R&D costs to considerget are:  tax relief or a payable tax credit, check that the costs:

•  theare accountingpart periodof fora whichspecific project to make an advance in science or technology, it cannot be an advance in the claimarts, ishumanities made or social sciences, including economics
• anymeet periodsthe ofdefinition account of connected personsR&D
• qualify (worldwide)for whichtax overlaprelief, withlisted in the claimant’ssection accounting‘Which period costs qualify’

You’ll

Which needcosts toqualify

You identifycan claim the coststax thatrelief relateon tosome of the periodscosts underyou consideration.incur Forfrom accountingthe periodsstart alignedto with the accountingend period of the claimant,project.

R&D usestarts thewhen exactwork figuresbegins forto thatresolve accountingthe period.   

Youscientific mustor usetechnological auncertainty reasonableand methodends towhen allocatethat costsuncertainty ofis theresolved, connectedor companythe work to theresolve periodit ofstops.

The timefollowing coveredinformation bywill thetell accountingyou periodwhich ofcosts theyou claimantcan companyand wherecannot either:  claim for.

• there

  You iscan aalso mismatchfind offurther accountingguidance periodsin betweenCIRD82000 of the claimantCorporate Intangibles Research and oneDevelopment orManual.

  Consumable moreitems

  You connectedcan company 

• aclaim connectedfor companythe isrelevant overseasproportion (andof soconsumable hasitems noused accountingup periodin forthe UKR&D, taxthis purposes) includes:
  • fuel
  • materials
  • power
  • water

  InYou certaincannot circumstancesclaim itthe maycosts beif appropriateyou tosell splitor coststransfer onownership aof timethe (day)consumable basis.items Inused otherup casesin itthe willR&D.

  Clinical betrials necessaryvolunteers

  For toR&D considerprojects whenin coststhe werepharmaceutical incurredindustry, you can claim for payments made to givethe asubjects fairof result,clinical fortrials.

  Data example,licence whereand R&Dcloud expenditurecomputing

  For isaccounting incurredperiods unevenlybeginning throughon aor period.after Any1 basisApril you2023, choosequalifying shouldexpenditure beis usedextended consistentlyto include data licence costs and youcloud shouldcomputing becosts.

  A abledata licence is a licence to explainaccess effectivelyand whyuse you’vea usedcollection it. of digital data.

  RelevantCloud R&Dcomputing expenditureincludes:

  • data meansstorage
  • hardware costsfacilities
  • operating onsystems
  • software whichplatforms

  You R&Dcan reliefclaim couldfor bemost claimeddata forand thecloud period,computing whethercosts orspent noton aR&D.

  Externally claimprovided isworker actuallycosts

  Workers made.supplied Generally,by ita muststaff alsoprovider formsuch partas ofan theemployment totalagency, relevantare costs.   classed as externally provided workers.

  TotalYou relevant expenditure includes: can:

  • costsclaim that100% areof broughtthe intorelevant accountpayments, underif Generallyyour Acceptedcompany Accountingand Practicethe (GAAP)staff inprovider calculatingare theconnected
  • claim profits65% of the relevant payments made to a tradestaff —provider, ifwhich is not connected to your accountscompany, areif preparedthey correctlysupply underexternally GAAP,provided thisworkers willfor bethe project

  Staff costs

  For thatstaff feedworking intodirectly on the profitR&D beforeproject, taxyou incan yourclaim profitfor andthe lossfollowing accountcosts, oras incomelong statement as they relate to R&D:

  • bonuses
  • anysalaries
  • wages
  • pension pre-tradingfund costscontributions
  • secondary onClass which1 reliefNational wouldInsurance becontributions availablepaid underby s1045the CTAcompany

  In 2009specific SMEcircumstances scheme

• anyyou amountsmay deductedalso inclaim thefor taxan computationelement underof s1308administrative CTAor 2009support Conditionsstaff who work to bedirectly satisfiedsupport —a allowableproject, asfor example:
  • human resources used to recruit a deductionspecific inperson computingto work on the profit project
  • specialist cleaning staff

  ItThese doesare notknown include: as qualifying indirect activities.

  The following are some examples of staff costs that you cannot claim for:

  • anyredundancy amountpayments
  • staff ofcosts amortisationfor addedclerical backor inmaintenance thework taxthat computationwould underhave s1308been CTAdone 2009anyway, Conditionslike tomanaging bepayroll

  Software

  You satisfiedcan —claim allowablefor assoftware licence fees for R&D and a deductionreasonable inshare computingof the profit 

• anycosts for software partly used in your R&D activities.

  Subcontractor costs

  You whichcan consistclaim:

  • 65% of the relevant R&D costs made to a payment,subcontractor
  • the orrelevant otherR&D transfercosts ofif value,the tosubcontractor anotheris connected to your company

  If

  Examples yourof creditcosts exceedsthat thedo PAYEnot cap

  qualify

  The taxfollowing creditare other examples of costs that you receivecannot inclaim for:

  • capital expenditure
  • the accountingcost periodof cannotland
  • the exceedcost of patents and trademarks
  • rent or rates

  Calculate the PAYEenhanced cap,expenditure

  Follow unlessthese you’resteps exemptto fromcalculate the cap.enhanced expenditure.

  1. TheWork PAYEout capthe amountcosts isthat £20,000are plusdirectly 300%attributable to R&D.

  2. Reduce any relevant subcontractor or external staff provider payments to 65% of the company’soriginal relevantcost.

  3. Add PAYEall andcosts Nationaltogether.

  4. Multiply Insurancethe contributionsfigure liabilities.by 86%.

  5. ForAdd morethis information,to readthe CIRD90600-PAYEoriginal cap.R&D expenditure figure.

     What

  If you needmake a trading loss, you can choose to dosurrender next this and claim a payable tax credit.

  IfYou yourcan companyfind andmore projectinformation areon eligiblehow to claimconvert R&D tax relief forinto smallpayable tax credits in CIRD90500 of the Corporate Intangibles Research and medium-sizedDevelopment enterprises,Manual.

  Before you canclaim

  You applymust forfollow advancethese assurancesteps tobefore findyou outclaim ifthe tax relief, or your claim willmay not be accepted. valid.

  1. YouFor mustaccounting alsoperiods beginning or after 1 April 2023, check if you need to submit a claim notification form to notify HMRC in advance of your claim. Find out what you need to send to tell HMRC that you’re planning to claim thisR&D relief.tax relief.

  2. From 8 August 2023 you must submit an additional information form to support your claim. Find out how to send the information and what to send when you submit detailed information before you claim R&D tax relief.