BUSINESS

Research and development credits

The government has paid out more than £850 million of support to over 16,000 small and medium companies in the form of research and development (R&D) tax credits since the scheme started in 2000. A survey among companies carrying out R&D found that the tax credits had enabled a third of them to take on projects with a longer pay-off time and nearly a quarter had taken on more risky projects.

The scheme gives small and medium businesses tax relief on 150% of qualifying expenditure on R&D. You need only spend £10,000 on research and development in an accounting period in order to claim - and a wide range of projects can qualify. Very broadly, projects qualify if they are intended to increase scientific or technical knowledge, or to create or improve a process, product or service through scientific or technical advances. Expenditure has to be on staff costs or on consumables used directly in carrying out R&D. Capital expenditure does not qualify, although there is a separate 100% capital allowance for equipment used in R&D.

Large companies can only claim 125% and there are several other differences in the rules.

If you are carrying out R&D, or are not sure, do ask us about tax credits.