SME vs RDEC: which R&D tax credit schemes can I claim?
SME vs RDEC
Are you navigating the labyrinth of R&D tax credit schemes for your business? If so, you're not alone. Many small to medium-sized enterprises (SMEs) and larger corporations find themselves in a similar quandary when it comes to claiming under the SME R&D tax credit scheme or the Research and Development Expenditure Credit (RDEC) scheme. Let's delve into the details and demystify these schemes to help you make an informed decision.
SME R&D Tax Credit Scheme vs. RDEC
As of now, the SME R&D tax credit scheme caters specifically to small to medium-sized businesses, while the RDEC scheme is tailored for larger corporations. However, it's essential to note that these schemes are set to merge after April 2024.
If your projects have received grant funding classified as notified state aid, you won't qualify for relief under the SME scheme but may still be eligible under RDEC.
Differences in Qualifying Costs and Expenditure
Between April 2023 and 2024, both SMEs and RDEC-qualifying entities can claim relief for staff costs, consumables, software, and externally provided workers (EPWs). However, there are distinctions in eligible subcontractor expenditure. Under RDEC, subcontractor claims are restricted to specific criteria, including individual subcontractors or qualifying bodies such as charities and research organisations.
R&D Relief Rates
Since April 2023, the relief rates have seen revisions, varying depending on your business's situation. Loss-making SMEs, for instance, may now claim relief at rates ranging from 18.6% to 27%, while profit-making SMEs can claim relief between 16.34% to 21.5%. RDEC projects, particularly those grant-funded, have seen an increase in relief from 10.53% to 16.2% for expenditure incurred post-April 2023.
Navigating R&D Tax Credits
Understanding the intricacies of R&D tax credits can be daunting, but it's crucial for maximising your climate tech business's financial benefits. Whether you're exploring tax relief for R&D, claiming R&D tax credits, or determining eligibility criteria, seeking guidance from our R&D tax credit specialists can streamline
the process.
As changes to R&D tax credits continue to unfold, staying informed about updates and leveraging available incentives can bolster your climate tech innovation efforts and financial stability.
