Research and Development for Small and Medium Enterprises
If your organisation has overcome technological challenges to develop new products, processes, materials or services, then you may qualify for generous R&D tax incentives. Many Small and Medium sized companies are not aware of the extent of their eligible activities, or that they were eligible at all. Deloitte has helped many clients achieve tax cash savings under the R&D regime.
If your organisation has overcome technological challenges to develop new products, processes, materials or services, then you may qualify for generous R&D tax incentives.
With effect from 1 August 2008 Small and Medium sized companies can claim 175% (up from 150%) of their qualifying revenue costs on eligible R&D activities when calculating their taxable profits. Companies paying corporation tax can use the deductions to reduce their tax bill but those in a loss position may be able to surrender the losses to HMRC in return for a payment of up to 24.5p for every pound of qualifying R&D expenditure. An extension of the definition of an SME from 1 August 2008 means that the regime is now potentially applicable to companies who (including their associated group companies) have less than 500 employees and either turnover not exceeding €100m or a balance sheet total not exceeding €86m. In certain circumstances where costs are excluded from the SME regime a claim may still be possible under the less generous large company regime.
As from 1 August 2008 under the SME scheme, there is now a cap of €7.5m on the amount of R&D aid that can be given per R&D project over its lifetime. SMEs will therefore need to think about the effect this will have on the amounts claimed which may involve calculating the benefit under both the SME and Large company schemes. Also, those companies who do not prepare their accounts on a going concern basis, or if the going concern basis is used only because of the expectation of claiming the SME relief, will no longer be able to make claims under the SME regime after 1 August 2008.
The SME regime and subsequent changes have created a degree of complexity. However, SME companies performing R&D have much to gain from investing in getting the claim process right. This includes the initial determination of whether the company can claim under the SME regime, through to the identification of all of the areas of eligible R&D activity in the company and filing the claim in a timely manner to realise the benefit as soon as possible.
Learn more from the Deloitte experience by downloading our PDFs:
The Deloitte team offer a number of bespoke services which are tailored for each organisation. Read how other SMEs have benefited:
- This organisation prepared its R&D claims in-house but felt more confident in proceeding if their claim was reviewed. Read more (PDF, 161 KB)
- A pharmaceutical SME prepared their R&D claim internally, but Deloitte increased their tax savings by £90 000. Read more (PDF, 218 KB)
- This SME had previously been advised that their activity was not eligible for R&D relief, but Deloitte successfully claimed over £700,000 of R&D cash back for the client. Read more (PDF, 221 KB)
- A design and manufacturing client were uncertain that their activities could be eligible for R&D relief, due to the nature of the projects undertaken. But Deloitte discovered a massive tax saving. Read more (PDF, 222 KB)
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