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SMEs under RDEC

All that you need to know

SME's under RDEC - All That You Need To Know

So, most of the time if you are a SME (Small to Medium Enterprise) you will claim via the SME R&D Tax Credit incentive. However, there are instances where a SME will be unable to claim through the SME route and will have to claim through RDEC instead, those are:

  • If you have been in receipt of grant funding and/or subsidy
  • If your business has undertaken sub-contracted R&D work for a larger enterprise

For those kinds of projects, SMEs can fall under the RDEC scheme.

RDEC Scheme

In most instances, in order to qualify under the RDEC incentive UK companies need to have over 500 employees. You can still claim as a SME under RDEC in certain cases, you can find out more about this below.

Similarly to the SME scheme, RDEC branch of the incentive offers a tax relief on all eligible R&D activity that a company has invested money in. RDEC rate before 1st of April 2020 was 12% however, this rate has increased to 13% post this date.

This means that for every £100 spent on eligible R&D activity, your company can receive between £9.57 and £10.53 after tax.

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I Have Received Grant Funding - Can I Claim?

If you are a SME and your R&D activity was funded through a grant, then the SME scheme does not allow you to claim however, the RDEC scheme does.

With most grants, they will only fund a percentage of the project e.g. 70%, and the rest will be match funded by the SME. The amount that you can claim will also depend on the State Aid rules and each case is different.

As an example, under the RDEC scheme, if a company has received a Notified State Aid Grant, then it is possible to claim for the following expenditure: consumables, Externally Provided Workers (EPWs), materials and staff. If however it is Non-Notified State Aid, then the 30% match funding that the SME had to supply may also be eligible under the SME scheme.

This process can become complicated, hence why we recommend getting in touch with experts like ourselves that can advise you on the best steps to take.

I’m A SME Subcontracted By A Large Company – Do I Claim As SME Under RDEC?

In this case, yes, you can claim through the RDEC scheme for any expenditure incurred for your R&D activity.

If you are a SME subcontracted by another SME, then you will be able to claim for your R&D expenditure through the SME scheme.

It is really common for business of all sizes to subcontract workers within specialist areas if your business lacks the required skills. Most common areas where activities are subcontracted are: software development, laboratory tests and design work.

Play Video

Research And Development Tax Explained

In this video we give you a quick overview of what research and development tax is and what activity your company needs to be undertaking to qualify for the incentive.

Why Choose Us

How Do I Work With Counting King?

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Discovery meeting

We will always conduct a discovery meeting to talk you through the incentive, explain our process, and establish whether your company carried out eligible research and development activity.

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Site visit

During the second stage, we will visit your site and conduct informal interviews with key personnel to gain a deeper understand of the business for the technical report. We will also ask for your up-to-date financial data for our in-house analysis.

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Benefit analysis

We will conduct our research and development benefit analysis, where we assess all eligible costs and calculate your maximum benefit.

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Submission

We will submit your claim to HMRC within 2 weeks of securing all completed documents. HMRC will process your payable credit claim and pay out the benefit within 28 days. In the case of HMRC requiring additional information, Counting King will oversee this process.

FAQ

Frequently asked questions.

  1. Creating new products, processes or services.
  2. Developing a prototype.
  3. Developing or improving existing software/prototype and/or service.

R&D Tax Credits stands for research and development. It is a government incentive that was introduced in 2000 by the government, to encourage companies to invest in R&D.

It allows companies to reduce their tax bill or claim payable cash credits.

  1. By the HMRC definition, R&D activities that qualify must work towards the advancement of science or technology.
  2. This includes, but is not limited to: utilising technology, improving existing products, software advancement/development, integrating existing components in brand new solutions.

This depends on multiple factors. 

If you are claiming under the SME incentive, then you are eligible to claim anywhere between 15% and 33% for your qualifying costs. This is determined by factors such as turnover and staff count.

If you are a large company, then you will qualify under the RDEC branch of the scheme, and you’ll be able to claim 13% of your qualifying expenditure. This benefit will be in the form of tax credits. 

In theory, HMRC will process your R&D Tax Credits claim within 28 working days. However, this can very based on peak periods, workloads and resource availability. 

If you decide to use Counting King for your R&D Tax Credits claim, we will submit all documentation to HMRC within 2 weeks of receiving all relevant information from you. 

You can claim R&D Tax Credits for up to 2 years after the accounting period has ended, for the time it is associated with.

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Find out how simple it is to claim your R&D Tax Credits 

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

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