Research and Development tax relief is a key part of the Government’s plan to stimulate investment in research and development. Whilst I have discussed (in previous articles) the eligibility process, we now move onto the claim and how it is calculated.
For every £1 spent on R&D, you claim tax relief on £2.30 under the SME scheme and £1.30 under the Large Company Scheme. In short, your actual costs are enhanced by 130% and 30% retrospectively.
Here’s an example to illustrate how the relief works:
SME Limited spends £50,000 on R&D and its taxable profit after these costs amounts to £175,000.
Here the company has saved £13,000 – over a 35% reduction in corporation tax.
Using exactly the same figures, LargeCo Limited would have saved £3,000, but in practice large companies are likely to be spending much more.
If you have any questions, please do contact Michael Burgess on 01782 279615.