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SME R&D

Everything that you need to know

What Are R&D Tax Credits?

The R&D tax incentive was brought in 2000 by the UK government to encourage scientific and technological innovation within the United Kingdom. At its base, the incentive is a Corporation Tax (CT) tax relief that may reduce a company’s tax bill if your company is liable for CT of, in some circumstances it can result in a payable tax credit. The incentive is open to UK limited companies of all sizes, however dependant on the size of the organisation they will fall in either the SME or the RDEC incentive

How much could you receive as a

SME Business?

Use our free calculator today and you could have a significant benefit amount within 28 days!

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What Is The SME Incentive?

For the purpose of the R&D tax incentive, a SME (Small and Medium-sized Enterprise) is a UK Limited company that falls within certain criteria looked at by HMRC, these
are:

  • Staff Headcount (less than 500).
  • Either turnover (€100m) or balance sheet total (less than €86m).

There are exceptions to this in certain scenarios, the most common of which is that the SME company is part of a group (has partner and linked enterprises). This is because in this situation that company will need to consider its own data, a proportion of a partner enterprise’s data and/or the data of a linked enterprise.

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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.

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Claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss (this is capped at the lesser of either a) the amount of unrelieved losses sustained in that period by the company or b) 230% of the related qualifying R&D expenditure.

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With effect 01/04/2021 - SMEs applying for R&D tax credits will be eligible to a maximum of £20,000 in repayments per year plus three times the company’s total PAYE and NIC liability.

4 Common Claimable Costs

Find out what costs you can claim back on for your SME’s R&D projects 

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Salary

Gross Salary/wages, Class 1 NIC and pension fund contributions (as a percentage of time spent on R&D).

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Subcontractors

Connected Subcontractors and Unconnected Subcontractors (restricted to 65%) relevant to R&D.

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Travel

If the costs of travel relating to the R&D are initially paid for by the staff member this cost can be included (as is deemed a staff cost), however if travel is paid for via a company credit card it is not allowable.

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Materials

Materials consumed and wastage during development – Mainly materials testing / prototyping during development attempting to develop the optimal solution.

Conditions To Qualify For The SME Incentive

Sometimes the parts you may think qualify, don’t. Here are some examples of what doesn’t qualify for SME R&D

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Closure

The business has to function without the threat of liquidation for the foreseeable future, which is usually regarded as at least the next 12 months.

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Corporation Tax

The company has to be a UK Limited company and subject to Corporation Tax.

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Staff Threshold

The company meets the SME thresholds – under 500 staff and under €100m Turnover or under €86m Gross Assets.

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Grants

No grants or subsidies have been received in respect of the expenditure – this includes notified state aid and de-minimis funding.

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Case Study

Read Our Manufacturing Case Study To Find Out Just How The Incentive Can Help You Grow

FAQ

Frequently asked
questions.

In short, yes. The best thing to do is to figure out how much R&D you are doing, you should then be able to assign a proportion of your light, heat, water and power that was used for your R&D and amend your claim accordingly. 

One of the biggest portions of claims for the Research and Development tax incentive is circled around staff costs. Whether that might be people directly involved within the R&D or others who might be indirectly involved.

No, you do not need to create a new product to qualify for R&D Tax Credits. For example, if you tweaked a cleaning product which had an advancement, this could be claimed for the R&D incentive. Anytime you have attempted an advancement in the Accommodation and Food sector, whether this worked or not, could still have the potential to be a qualifying activity.

Yes! You are able to claim for unsuccessful projects as this falls under the ‘uncertainty’ you faced during the Research and Development you undertook.

Examples of uncertainty for R&D are;

  • Attempting to fix an issue with machinery that does not meet your manufacturing requirements however being unable to resolve the issue
  • Managing environmental factors, decreasing your carbon footprint during  your manufacturing process 
  • If a recipe or cleaning product didn’t work as well as you anticipated and didn’t provide you with what you needed

Download Our Infographic

Find out how simple it is to claim R&D Tax Credits in Accommodation and Food.

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Insight

Update Article & News.

UK Innovation Strategy

UK Innovation Strategy A recent government paper was published on 22nd July 2021 – titled ‘UK Innovation Strategy: leading the future by creating it’  

Read More »

Manufacturing case study

Looking for a Manufacturing case study? Start my claim Been told you don’t qualify? A window manufacturer, based in the heart West Yorkshire had previously

Read More »
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Start Your Claim With Counting King Today!

Don’t hesitate on starting your claim, you could be entitled to money you didn’t realise you could have. With Counting King’s simple process you don’t need to worry about your time invested in the claim.

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