First and foremost, will you be classified as an SME or a Large Company?
SME Definition
R&D incentives for SMEs come in the form of a Corporation Tax (CT) relief or tax credit. A business wishing to claim under these schemes must have:
- Less than 500 employees
- AND
- EITHER an annual turnover of less than €100 million OR a balance sheet of less than €86 million
Large Company Definition
When it comes to the Large Company definition for R&D tax purposes, it’s much simpler. In a nutshell, if you don’t fit the SME criteria above then you are categorised as a Large Company, and therefore would need to apply under the Research and Development Expenditure Credit (RDEC) scheme.
R&D incentives criteria
Once you know which R&D incentive scheme you will qualify for, you just need to check that your business fulfils all the points in the relevant checklist below.
SME eligibility criteria
- Company within the charge to UK corporation tax
- Going concern
- Company is a Small or Medium Enterprise
- Trade to which R&D relates
- R&D has not been contracted to the company
- Expenditure is revenue in nature for tax purposes and deductible in the period
- No grants or subsidies have been received in respect of the expenditure
Large Company eligibility criteria
- Company within the charge to UK corporation tax
- Going concern (for R&DEC)
- Trade to which R&D relates
- Expenditure is revenue in nature for tax purposes and deductible in the period
- R&D has not been contracted to the company by an SME
Why should you claim R&D incentives? Take a look at the video and find our how tax credits helped these businesses: