Research and Development relief

Tax relief is available on research and development (R&D) revenue expenditure at varying rates. Maximum rates of relief for 2010/11 are as follows:

• For small and medium-sized companies paying tax at 21%, the maximum rate of tax relief is 36.75% (that is a tax credit on 175% of the expenditure)
• For small and medium-sized companies not yet in profit, the relief can be converted into a tax credit payment worth 24.5%
• For larger companies paying tax at 28%, the maximum rate of relief is 36.4% (that is a tax credit on 130% of the expenditure).

This is subject to a minimum annual spend of £10,000. SME relief is capped at 7.5 million euros per project and subject to the most recent accounts having been prepared on a going concern basis.
SMEs barred from claiming SME R&D tax credit by virtue of receiving some other form of state aid (usually a grant) for the same project will be able to claim the large company R&D tax credit. This means that they will qualify for relief on 130% of their R&D expenditure.