Commentary

D1.420 R&D tax relief for SMEs

Corporate tax
Corporate tax | Commentary

D1.420 R&D tax relief for SMEs

Corporate tax | Commentary

R&D and SMEs—the reliefs

D1.420 R&D tax relief for SMEs

For the latest New Development, see ND.1350, ND.1918.

Where the company is an SME it may claim either:

  1.  

    •     an enhanced revenue deduction of an additional 130% on qualifying R&D for the accounting period (see below)1

  2.  

    •     a tax credit in respect of its surrenderable loss with a cash payment of 14.5% of the surrenderable loss, which is not available to carry forward (see 'SME R&D tax credit' below)2

  3.  

    •     a tax credit for pre-trading expenditure (see D1.422)3

  4.  

    •     R&D expenditure credit (RDEC) (see D1.435A) for work subcontracted to it by a large company or any person otherwise than in the course of carrying out a UK chargeable trade (see 'R&D subcontracted out to SMEs and large companies' in D1.414), subsidised expenditure (see D1.420A) and capped R&D expenditure (see 'Cap on SME R&D reliefs' in D1.402A)4

An SME cannot make a claim for an enhanced R&D deduction, a claim for pre-trading expenditure or an R&D tax credit at a time when the company is not a going concern (see 'Going concern and R&D tax relief' in D1.402A).

HMRC has published guidance on Research and Development tax relief for small and medium-sized enterprises.

Prior to IP completion day (defined as 11pm (GMT) on 31 December 20205), companies that received more than €500,000 a year from the relief had certain details published on the European Commission website6 as R&D relief constituted state aid for EU purposes.

Post IP completion day, with the end of the

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