RESEARCH & DEVELOPMENT TAX RELIEF

R&D tax relief (also known as R&D tax credit) helps innovative businesses undertaking R&D related activity claim a generous corporation tax deduction or a cash refund from HMRC.

R&D tax relief is a tax incentive from the UK Government designed to encourage companies to invest in R&D.

The scheme has been around since 2000 and last year over 76,000 SMEs claimed almost £4.4bn in tax relief. see here for more R&D statistics.

Pryam Financial’s specialist R&D tax team have provided an end-to-end service to existing clients, new businesses and our network of professional introducers.

CLAIMING R&D TAX RELIEF

The R&D tax landscape has changed significantly in recent years. For accounting periods beginning on or after 1 April 2024, the SME and RDEC schemes have been blended to create the R&D merged scheme.

The new merged scheme rewards innovative businesses for R&D projects that seek to make an advance in science or technology (including mathematical advances). This might include improving an existing product or service or inventing a new one. An advance can also result in a new discovery that increases our overall knowledge in a field of science or technology.

MERGED R&D SCHEME – WORKED EXAMPLE

Assuming your company has qualifying R&D expenditure of £100,000, the gross R&D tax credit available under the merged scheme would be £20,000 (20% of qualifying costs).

If your company pays the main corporation tax rate of 25%, the tax payable on the credit is £5,000 (25% of £20,000). After deducting this tax, the net benefit to your company is:

£20,000 (credit) – £5,000 (tax) = £15,000

This means the effective tax benefit is 15% of your qualifying expenditure (£15,000 ÷ £100,000).

If your company falls under the small profits corporation tax rate of 19%, the tax on the credit reduces to £3,800 (19% of £20,000), increasing the net benefit to:

£20,000 – £3,800 = £16,200

This results in an effective tax benefit of 16.2% of qualifying expenditure.

UK R&D TAX SPECIALISTS

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Why partner with Prysm Financial?

✔ ACCA regulated accountancy firm
✔ Significant R&D experience
✔ Dedicated and qualified R&D tax manager
✔ No upfront fee
✔ Dynamic and competitive pricing
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