R&D Expenditure Credit allows SMEs to claim cash for subsidised R&D

MSC R&D has recently gained R&D grant funding and R&D tax relief for a number of SME clients who have no corporation tax liability.  We have also been able to advise on their R&D claims which had previously been handled by general practice accountants with no specialist knowledge of the R&D scheme.

It appears that some SMEs have not been made aware that if they have undertaken R&D projects which have received a government grant they are now able to claim a cash credit under the large company Research & Development Expenditure Credit scheme (RDEC), an option which is not available under the traditional enhanced deduction.

Confusion appears to have arisen within some accountancy firms due to the fact that R&D projects which have received funding which is a notified State Aid then cannot qualify for R&D tax relief under the SME scheme.  Instead, companies in receipt of a Smart award or other Innovate UK grant would previously only have been able to claim R&D tax relief under the old R&D tax relief scheme for large enterprises. However, this scheme only allowed companies an enhanced deduction to reduce the company’s profit, so if the company didn’t pay tax this would only have increased its tax losses.

Whilst the old large company R&D scheme will continue to run in parallel with the RDEC until April 2016, grant recipients are advised to switch to the RDEC, not only because of the ability to gain a cash credit but also because it is more generous, with a payable credit rate of 11% from April 2015.

If you want further help with your R&D tax relief, contact us today.