An important reminder of the value of R&D tax relief

Small and medium sized companies may be able to claim Research & Development Tax Relief which allows companies to:

• deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction
• claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss. The surrenderable loss is the lower of the tax loss for the year and the enhanced qualifying expenditure.

The tax credit would usually be paid to the company as cash by HMRC so can be a definite help with respect to cash flow. Thus if a company has qualifying expenditure of £100,000 the enhanced expenditure is £230,000 and the company could claim up to £33,350 from HMRC.

The company must carry out qualifying Research and Development activities and the qualifying expenditure relating to those activities include wages and salaries, subcontractor costs, and consumable items. At the point that the company makes the claim it must be able to demonstrate that it is a going concern, this is a point for careful consideration during these difficult times.

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