2nd December 2016

Research & Development (R&D) tax Relief

Research & Development Tax Relief is granted by HMRC to help reduce your company’s tax bill!

You can claim R&D relief if a project seeks to achieve an advance in science or technology through the resolution of scientific or technological uncertainty.

Relief is on expenditure directly associated with R&D, including staffing, materials, software and some subcontracted costs (65%). Expenditure on capital assets is not included, but may qualify for 100% capital allowances.

SME’s can claim relief of 230%. This means that for every £100 of qualifying costs, your company could reduce your CT by an additional £130. 100% of the original cost plus 130% additional relief.


Example 1
R&D expenditure £10,000
Normal profit £13,000
 R&D relief £10,000 x 130% = £13,000
 Profit after R&D relief        0


If your company has an allowable trading loss, this can be increased by 130% of the qualifying R&D costs. This loss can be carried forward in the normal way, but only if you choose not to convert it to tax credits (14.5% of adjusted loss).

In this example below, – £10,000 adjusted loss can be carried forward or a cash repayment of £1,450 from HMRC.

Example 2
R&D expenditure  £10,000
Normal profit  £ 3,000
 R&D relief  £10,000 x 130% = £13,000
 Loss after R&D relief – £10,000


Potential tax credit:  £10,000 x 14.5%   =    £1,450

R&D tax relief can be claimed on your Corporation Tax Return. The normal time limit for making your claim is 2 years after the end of the relevant accounting period.

HMRC will make approved payments after they receive your return.


If you wish to know more about Research & Development Tax Relief or need help with an application please contact us on 01223 422 350, info@psfaccounting.co.uk.  Alternatively, call in and see us at St Johns Innovation Centre for an informal chat.