The Benefits of Claiming R&D Tax Credits

R&D tax credits allow companies to recover a proportion of their expenditure on research and development (R&D).

For accounting periods starting on or after April 1st 2024, the previous two schemes – RDEC and SME – were merged so that R&D tax relief will be 20% on all qualifying expenditure, regardless of company size.

The exception is for loss-making SMEs classed as being R&D intensive – those which spend more than 30% of their total expenditure on R&D – who will receive a 27% tax credit.

Companies which utilise capital in the development of products, services and/or processes are entitled to a source of funding that is non-repayable, applicable to businesses of all sizes, across all industries (including the creative industries) with no minimum spending requirement.

The benefits of an R&D tax credit claim are as follows:

1 Cost Savings

R&D tax credits provide businesses with an opportunity to offset expenses associated with the research and development of products, services and/or processes such as employee wages, supplies and equipment, reducing the financial burden and risks associated with innovation. For expenditures to successfully qualify for the R&D tax credit scheme, the project must aim to make an advancement or resolve a problem in science or technology.

2 Increased Cash Flow

Utilising R&D tax credits enables companies to either procure a cash refund or a reduction in their tax liabilities, enabling them to retain a larger portion of capital available in order to reinvest in R&D incentives or other areas of the business.

3 Competitive Advantage

The active pursuit of R&D activities and leveraging tax credits furthers a company’s competitive advantage through the enhancement of their own capabilities and ability to position themselves favourably in the marketplace. Knowing how to calculate R&D tax credit can give you a market edge.

4 Talent Attraction and Retention

R&D tax credits provide companies with greater opportunities to attract and retain talent in their field. The availability of tax incentives can vastly increase the attractiveness of a company in the perception of skilled professionals, due to increased flexibility and growth potential.

Overall, R&D tax credits are advantageous for companies and the economy as a whole, with every £1 spent on R&D in the public domain providing £1.40 of R&D private investment, with a net economic benefit of £7 for the UK.

Tax credits greatly reduce the risks involved in expanding and developing a business, allowing companies to strive for market growth and a competitive advantage due to a reduction in the financial burden of a company’s owners, shareholders and/or investors.

Call our team today on 01332 477 070 for a free, no-obligation eligibility consultation.

Jonathan Wilde

Jon has been a professional writer since leaving school, with much of his career spent in national press journalism including 13 years working for PA Media Group. He subsequently became immersed in the corporate finance sector as a senior content writer for randd and other companies within the K3 Advisory Group, developing a detailed knowledge of R&D Tax Credits and the processes by which companies obtain tax relief.