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Research and development Tax Credits

What are R&D tax credits?

R&D tax credits for small and medium-sized companies which incur expenditure on research and development provide for a 150% uplift when calculating the taxable profits.

Companies who are not making profits can either increase the value of their losses carried forward, or surrender the tax credits in return for a cash payment. The Revenue will pay £24 for every £100 of qualifying expenditure (up to a maximum of the PAYE and National Insurance paid over to the Revenue during the year).

R&D tax relief applies to all companies. However, for companies which are not regarded as small or medium-sized the claim is restricted to 125% of expenditure. Such companies are also unable to surrender their tax credits for a cash payment.

What is a small or medium-sized company?

A company is a small or medium-sized company if it has less than 250 employees and has either:

· an annual turnover of not more than €40 million; or
· an annual balance sheet total of not more than €27 million

The company must also not be owned 25% or more by companies which are themselves not small or medium-sized for these purposes.

Which costs qualify for R&D tax credits?

Companies can claim R&D tax credits on the costs of:

· employing staff for R&D;
· consumables used for R&D; and
· certain costs of sub-contracting R&D.

When do these costs not qualify?

Costs do not qualify if:

· they amount to less than £10,000 in one year;
· they are met by another organisation;
· they are part of a project which receives State aid; or
· the company does not own the rights to the intellectual property resulting from the R&D.

For further details see



Date: 3rd May, 2007
Author: Cathy Corns


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