R&D Tax Relief and R&D Tax Credits – how do they differ?

In the tax industry, the terms R&D tax relief and R&D tax credits are both used by tax advisors and businesses. These terms broadly relate to the same tax incentive scheme and have become synonymous over the years. However, there is a difference.

For clarity, there are two forms of R&D tax relief, one for SME’s and one for large companies. The R&D relief scheme for SME’s is designed to reduce their Corporation Tax liability by deducting their R&D expenditure, enhanced by 130%, from their taxable profit calculation. However, loss-making companies have no profits to ‘relieve’, which is where the term ‘R&D tax credits’ comes in. Where the R&D expenditure deduction creates or increases a loss, the company can opt to surrender some or all of the loss for a tax credit (worth 14.5% of loss) which is received as a cash payment, or they can bring the losses forward to relieve future Corporation Tax liabilities.

The R&D tax relief scheme for large companies is called a Research and Development Expenditure Credit (RDEC). This is a tax credit currently worth 13% of the qualifying R&D expenditure which is claimed ‘above the line’.

These are simplistic definitions and there are other considerations not detailed above. We invite you to contact us to talk to one of our tax experts about your entitlement to R&D tax relief.

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What our Clients Say...

We have referred tens of clients to Cost Care Tax over the past 7/8 years and all have been impressed with the professionalism and efficiency of their team. The support in relation to R&D tax claims is unrivalled and exceptional and we highly recommend them. Thanks to Wayne, Paul, Tom, Ben and the rest of the team
Even as a small business (10 employees), we spend significant amounts on R&D projects both in time and materials. Cost Care Tax has managed our R&D Tax Credit claims for the past 7 years, and in that time we’ve found their professional approach has made the process rewarding, straightforward, and painless.
Cost Care Tax has always been there to help us understand what is claimable and what isn’t, and provide us with an easy to use document for recording R&D projects. The submission reports they write are very thorough, and once approved by us they deal directly with our accounts in submitting the claim to HMRC.
Cost Care Tax's services were recommended by a larger contractor who had dealt with Cost Care Tax for various accounting and tax purposes. Needless to say we were not disappointed and they lived up to their recommendation with a high level of professionalism and attentiveness.
As a smaller contractor we can rarely afford the time nor the internal personnel to carry out the abundance of R&D paperwork involved in tax credits. Cost Care Tax takes that pressure away and carries the burden both with complete care and within a decent time frame.

Cost Care is here to support accountants and your clients - call our team of experts today and refer your client …

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