SME Scheme
Applies to accounting periods which began before April 1st 2024. You can retrospectively claim under the SME scheme for the two years prior to your current accounting period.
What is the SME Scheme?
The SME R&D tax credit scheme was introduced to encourage innovation in the UK.
Companies with research and development expenditure can make a total deduction of 186% of their qualifying R&D expenditure. Resulting in effective tax benefits of up to 27p on the £1 for loss-making SMEs and up to 21.5p on the £1 for profit-making SMEs.
Why claim the SME scheme?
R&D Tax Credits are a vital benefit in providing a cash injection to companies which successfully claim for their research and development activities.
Smaller businesses are likely to especially welcome a financial boost and those who apply through the SME scheme can receive an enhanced rate compared to those on the RDEC scheme.
The tax relief received can be invested back into the business, potentially to fund further R&D innovation or perhaps to enhance a company’s premises with new machinery or equipment.
You can gain an indication of how much you would be eligible to receive by using our R&D Tax Credit Calculator.
How did the R&D SME scheme change in 2024?
From April 1 2024, the SME and RDEC schemes were merged for accounting periods beginning on or after that date.
This had a significant impact on companies claiming R&D Tax Credits.
The tax relief received can be invested back into the business, potentially to fund further R&D innovation or perhaps to enhance a company’s premises with new machinery or equipment.
Key changes include:
- One single rate and set of rules: 20% post-tax rate between 14.7%-16.2%
- Qualifying rules for subcontracted and subsidised R&D (previously RDEC exclusive)
- Threshold for R&D intensity (loss-making SMEs with qualifying R&D from total expenditure) lowered from 40% to 30%
- Restrictions on overseas R&D expenditure
Introducing the SME Intensive Scheme
For accounting periods that begin on or after 1 April 2024, the SME and RDEC schemes are merged, creating one rate – 20% – and a singular set of rules. However, loss-making SMEs that are R&D intensive – which means more than 30% of their total expenditure is incurred on research and development – will receive an enhanced 14.5% tax credit (a net benefit of 27%).
The figure of 30% has been reduced from the 40% of total expenditure incurred on research and development which was the threshold for a company to be classed as R&D intensive before April 2024.
Find out the value of your claim
Any business in any sector can qualify. Discover how much you could be owed today!
Is my business eligible for the SME scheme?
SMEs that are eligible to claim R&D Tax Credits will have less than 500 employees, as well as a turnover of under €100million (£85million) or a balance sheet total under €86million (£73.59million).
Linked and partner enterprises will be included in this total and can affect your SME status. Calculating your R&D Tax Credits will be subject to the voting rights your business holds in another enterprise, in addition to the voting rights of your company which are held by other parties.
What can be claimed as R&D Tax Credits for SMEs?
Under the SME scheme, small businesses can claim Corporation Tax relief on projects which meet the government’s definition of research and development.
Projects which satisfy the following criteria could be eligible for SME R&D Tax Credit:
- Advancements in the field were achieved
- Scientific or technological uncertainty was present
- Your business tried to overcome uncertainty
- Your company demonstrated that a professional in the field could not identify a solution
Discover what qualifies for R&D tax credits here.
How do I claim the SME Scheme?
Our specialist team are available and ready to submit your claim, undertaking the considerable research needed to ensure all boxes are ticked in the mission to optimise the amount of tax relief you receive.
We have the knowledge and expertise, built up over nearly 20 years in this industry, to identify and include every R&D activity that qualifies for inclusion within a claim. The simplified, efficient procedures we apply are proven to work.
With input from your business, we will compile a detailed technical report. This is the vital document which explains the qualifying activities undertaken by your company, the scientific or technical challenges the R&D addressed and how existing legislation was adhered to.
We have an unparalleled claim success rate due to the vast experience and knowhow brought to the process by our senior-level team. If you would like an estimation of how much your claim could be worth, it can be obtained by using our R&D calculator.
R&D SME Scheme FAQs
What is the difference between the SME R&D scheme and Enhanced R&D Intensive Support (ERIS)?
The difference relates to the payable R&D tax credit rate available to loss-making SMEs. Under the standard SME R&D scheme, loss-making companies can surrender their R&D losses for a payable tax credit at 10%. Companies that qualify as R&D-intensive can instead claim under Enhanced R&D Intensive Support (ERIS), which offers a higher payable credit rate of 14.5%, resulting in a greater cash benefit. To qualify for ERIS, qualifying R&D expenditure must make up at least 30% of total relevant expenditure for periods beginning on or after 1 April 2024.
What are the benefits of claiming tax credits under the R&D SME scheme?
SME R&D tax relief offers smaller companies the chance to receive a cash injection. R&D intensity considerations for SME companies may result in an enhanced rate.
Is there a cap on the amount of SME R&D tax credit my business can claim?
The amount of payable R&D tax credit an SME can receive is capped at £20,000 plus 300% of its total Pay as you Earn (PAYE) and National Insurance Contributions (NIC) liability for the period.
Can my business claim SME R&D tax credit retrospectively?
You can claim on R&D activities for up to two years based on the end of your business’ accounting periods that your R&D expenditure relates to.
Any recent activities can be claimed once your current accounting period ends.
If you are not fully conversant about what you can claim for, check out the randd uk eligibility checker.
What evidence is needed to make a claim under the R&D SME scheme?
HMRC does not specify which pieces of evidence are required to support an R&D tax credit claim. Seek expert help.
How long does it take to receive SME R&D tax credit following a successful claim?
HMRC aims to process 95% of all claims within 28 days, but this is dependent on the nature of your claim and even the time of year in which your claim is submitted.
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