Small and Medium Enterprise (SME) Scheme Explained

The SME scheme is available for Small and Medium-sized enterprise, who are conducting Research and Development at their own financial risk. That generally means to develop or significantly enhance their own processes, materials, devices products or services. However, it does also extend to work that the company enters into through a tender process, or where a fixed price contract is agreed with a customer for the delivery of a completed piece of work, where R&D is required.

The only area of concern would be if a significant payment is received up front, generally >50%, in which case there is an argument that the project has been subsidised!

Use the links below to jump to specific content on this page:

What makes a business an SME? | Difference between the RDEC and SME schemes | How to calculate the SME Scheme | R&D SME FAQs

What makes a business an SME?

To qualify as a Small and Medium-sized entity, the business and any connected businesses (subsidiaries and parents) must:

• Employ less than 500 Full-time equivalent staff; and
• Have either:
  • Turnover below €100m; or
  • Gross Assets on the balance sheet below €86m

  So in essence a small or medium-sized entity can be pretty big!

  If you don’t meet the criteria to qualify as an SME or you’ve received a grant or subsidy or you’ve been subcontracted to by a large or international company or an individual or partnership, you’ll be able to claim RDEC.

  An SME can claim for all of the costs that qualify apart from Contributions to Independent Research, these can only be claimed under RDEC.

How to calculate the SME Scheme?

Under the SME scheme you are able to include all of the eligible costs, staff costs, materials consumed, utilities, software, payments to clinical trials volunteers at 100% of the relevant apportionment of time spent on R&D. You will also be able to claim 65% of the relevant time spent on R&D for subcontractors and externally provided workers engaged on the project.

Once you have calculated this pot of eligible costs, the tax relief allows for an additional deduction of 130% (to 1 April 2023 and then 86% after) of this pot of costs from your profits chargeable to corporation tax. If after this deduction you still have a profit then you will have made a tax saving equivalent to 24.7% of the pot of costs (after 1 April 2023, the tax saving will be equivalent to 21.5%). If however you had a significant loss before the additional deduction, you can choose to surrender that loss for a payable tax credit.

The amount of loss that you can surrender is capped at the lower of the total R&D spend (pot of costs plus additional deduction) or the loss created after the additional deduction. If you chose to surrender the loss, then you could receive a payable tax credit equivalent to 33.35% of your eligible spend (reduced to 18.6% from 1 April 2023)

 
 
 
 
 
 
 
  
 
 
 
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 Alex Pawle 
 
 
 
  
We went through the discovery call process with Simon and his team. We felt well advised through the complexity of R&D tax claims, and would certainly recommend Cooden to other SMEs.
  
 
  
 
 
 
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 Craig Coulton 
 
 
 
  
Cooden is five stars! Simon and his team stepped in to help our business with a complex R&D tax relief application. Simon’s attention to detail is second to none. His understanding of the nuances of tax law is impressive, and I’ve had the privilege of seeing his reporting first-hand. It’s not often you work with a team that exceeds your expectations, but Cooden has. I’m impressed and you will be too.
  
 
  
 
 
 
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 Narciso Baldo 
 
 
 
  
Simon and the team at Cooden are fantastic to deal with. Responsive, knowledgeable and friendly, they're expertise and insights in all things R&D have been invaluable to us. Highly recommend.
  
 
  
 
 
 
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 Darren Wynn 
 
 
 
  
Exceptional expertise and insight! Simon provided invaluable advice during our exploratory call. Their depth of knowledge and clear communication greatly enhanced our understanding. Truly grateful for their guidance
  
 
  
 
 
 
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 Dan Frost 
 
 
 
  
Excellent advice and support. Simon is clearly highly experienced and knowledgable on all things R&D related.
  
 
  
 
 
 
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 Alex Butler 
 
 
 
  
I had the pleasure of working with Simon, and I couldn't be more pleased with the exceptional accounting and R&D relief advisory services he provided. Simon's expertise in navigating the complex landscape of R&D relief schemes with HMRC is truly commendable. Simon's deep knowledge and dedication to his work were evident throughout our collaboration. He demonstrated a keen understanding of the intricacies of R&D relief, and his ability to guide us through the process was greatly appreciated!
  
 
  
 
 
 
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 Gavin Jones 
 
 
 
  
Simon was extremely helpful with our R&D tax claim, would highly recommend you speak to him if you have any concerns.
  
 
  
 
 
 
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 Caroline Lloyd 
 
 
 
  
Simon and the team at Cooden Tax Consulting are a pleasure to deal with, friendly knowledgable and efficient.  (On behalf of iPrescribe Exercise Digital Ltd)
  
 
  
 
 
 
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 Jack Maddalena 
 
 
 
  
I have had a great experience working with Simon and his team at Cooden Tax Consulting. We have used them multiple times, highly recommended, friendly experts.
  
 
  
 
 
 
 
 
 
 Google rating score: 5.0 of 5, based on 15 reviews 
 
   
 
 

Learn more about SME Tax Relief

If you are interested in learning more about SME tax relief and whether you can make a claim, please get in contact with the team at Cooden Tax Consulting today. We have years of experience working with businesses of all sizes and helping them to claim tax relief on their R&D work.

We would be happy to work with you to help you maximise your R&D tax credit claim, providing helpful advice and guidance throughout.