The SME scheme is the form of research and development (R&D) tax relief that is aimed at small and medium sized businesses. It provides smaller companies with the opportunity to gain tax breaks on R&D work that they have carried out.
Many SMEs don’t realise that they can claim R&D tax relief, believing that R&D is the exclusive domain of larger businesses and corporations. This scheme is specifically tailored for companies with fewer than 500 employees and with a turnover lower than €100 million. If your company carries out any kind of R&D work, then you should not be missing out on this tax incentive.
At Cooden Tax Consulting, we have years of experience providing small and medium sized businesses with help claiming the tax relief that they are owed – we can help you get it too. Get in contact with us today to learn whether you could claim back tax relief on the work that you have carried out.
What is the difference between SME R&D tax relief and RDEC?
The only real difference between the two forms of tax relief is the size of the business that is claiming. The Small and Medium Enterprise (SME) scheme is designed to provide tax relief to smaller companies whereas the Research and Development Enhanced Credit (RDEC) scheme is for larger businesses. If your business carries out any research and development work, you may be able to claim R&D tax credits through one of these schemes.
What makes a business an SME?
For you to qualify for the SME tax relief scheme, you need to fulfil the requirements of being a small or medium-sized enterprise. The definition in terms of the scheme is that the company must have fewer than 500 employees, as well as a turnover limit of €100 million, or a balance sheet total that does not exceed €86 million.
If you are over either of these figures then your business will not qualify as an SME, although you may still be eligible for RDEC tax relief.
R&D Tax Credits FAQs
When companies claim R&D tax relief through the SME scheme, they can gain a tax relief benefit of up to 230%. That means if your SME incurs costs of £1,000 on research and development, it will receive tax relief as if it had spent £2,300. If your business makes a loss in the tax year, it can make a claim that is worth up to 14.5% of the surrenderable loss.
These tax reliefs can be extremely valuable, so it is important to understand whether your company is eligible and what account counts as R&D.
To claim for R&D tax relief, you must be carrying out work on a specific project that is attempting to make an advance in science or technology. The project must relate to work that your company does – or work that you intend to do based on the results of your R&D work.
You must be able to show that you looked for an advance, the result was uncertain, you tried to overcome this uncertainty, and that this advance could not have been easily achieved by someone else in the field.
It is also important to understand exactly which consists relating to the research and development work that you carry out can be claimed for. Qualifying revenue costs include:
- Staff costs
- Material costs – either consumed or transformed
- Water and fuel
- Specially commissioned parts
- Contractor costs
- A proportion of overheads
The only real difference between the two forms of tax relief is the size of the business that is claiming. Smaller businesses apply for the SME R&D tax relief, while larger businesses apply for RDEC./p>
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.