Research and Development (R&D) tax credits arrived for small and medium sized enterprises (SMEs) in 2000 and for large companies in 2002.

R&D credits are a Corporation Tax relief that encourage innovation and enterprise within the UK economy.

However, there is a common misconception that R&D tax credits are only available for very specific scientific type research. The availability of R&D tax credits is far wider than many think.

Companies can apply for R&D tax relief if they are developing new or improved…

  • systems
  • processes
  • services
  • or products

… in the areas of technology or science.

R&D Project Rules

The R&D project in question must relate to the company’s trade and can be used by an existing company or by new start-ups. Small and medium-sized enterprises can claim R&D tax credits of 230% for expenditure incurred on or after 1 April 2015. There are different rules for large companies.

Recent figures published by HMRC have suggested that some 15,000 SME businesses claim over £800m in credits each year. However, many more companies could qualify. Interestingly, R&D credits can be used by a company in tandem with the SEIS. While the R&D tax credits scheme and the SEIS both offer generous tax advantages this can be even more striking when the schemes are used together.

Worked Example

For example, a start-up looking to establish itself in the hi-tech arena could secure SEIS funding and then use this money to create a new hi-tech platform that would qualify for R&D tax credits. The R&D work could allow for a 130% uplift in qualifying spend and create a tax refund in the new loss-making company. Claims for R&D tax credits are made on the company’s UK Corporation Tax return.

Even better, once the SEIS funds have been used, the start-up could go on to raise additional finance using the EIS and continue with its R&D activity and corresponding tax credits.

To find out what you could apply for get in touch with us now.

Do you have any questions about seis?

If you would like to find out more, we would be more than happy to arrange a free no obligation meeting with you at your office.