On 5 August 2022, The HMRC published updated guidance on research and development (R&D) tax relief for small and medium-sized enterprises.

Small or medium-sized enterprise (SME) R&D tax relief allows companies to:

  • deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction;
  • claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss.

Companies that can claim relief

Companies can claim R&D tax relief if it is a SME with:

  • less than 500 staff; and
  • a turnover of under €100 million or a balance sheet total under €86 million.

If company has external investors, this can affect on SME status. Taxpayer may need to include the figures of connected companies and partner companies.

Companies cannot claim SME R&D relief if the project is already getting notifiable state aid or it has been subcontracted by another company. However, it may be able to claim the R&D Expenditure Credit (RDEC).