Tax Advantages For Innovative Companies

07 July 2014

New and innovative products which will change how we conduct our lives are being thought up, it can seem, every day. It is products like these which keep the majority of businesses profitable, which is extremely important for maintaining an already fragile economy in the UK.

HM Revenue & Customs tries to incentivise companies to conduct more research and development into advances in fields such as science or technology, where there is a scientific or technological uncertainty, by offering Research and Development (R&D) Relief. R&D Relief enables qualifying companies to reduce their Corporation Tax liability, or, in some circumstances, to receive a tax credit instead, by way of a cash sum paid by HMRC.

R&D Relief Schemes 

A company or organisation can only reclaim R&D Relief if it is liable to corporation tax. For small to medium-sized enterprises, the scheme for claiming relief is: The Small or Medium-sized Enterprise (SME) Scheme

SME Scheme – How much R&D Relief can you claim? 

The tax relief allowable on R&D costs is 225%. This means that for every £100 of qualifying costs, you could reduce your Corporation Tax profits by an additional £125 on top of the £100 spent.

What if I make losses?

If your company makes a loss for the period, this can be increased by the additional R&D Relief (an additional 125% of the costs for SME Scheme). You then choose to either carry forward the losses to offset against future profits, or convert it to tax credits.

R&D Tax Credits

George Osborne recently delivered promising news in this year’s budget for SMEs claiming R&D relief in the 2014/15 tax year. As of April 2014, companies claiming R&D tax credits under the SME Scheme will benefit from an increase in the rate to 14.5% compared with 11% in the last tax year.

Am I Eligible?

Companies in many sectors are eligible for R&D Relief. Green & Co are a proactive firm of accountants who can, and have, helped many businesses in identifying eligible criteria for successful R&D claims. If you are thinking of innovative ways to stay competitive in your sector, then you may benefit from speaking with us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of KROMKRATHOG at

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