R&D Tax Credit Enhancement and Surrender Rates | Innovation Plus

R&D Tax Credit Enhancement and Surrender Rates

Posted on 4th May, 2015 |

The R&D Tax Relief scheme has had many changes in the past 5 years, and it is often challenging to know which rates apply in particular periods, or what the benefit is.

The table below shows the different enhancement and surrender rates that applied within the past 5 years, and additionally, the benefit for a profitable tax-paying company. Remember that the surrenderable cash credit is only available for loss-making companies and is capped by both the losses for the period and the enhanced amount expended on R&D. In other words, if a company is profitable, there is no cash credit available and the benefit of the scheme will come in the form of an enhanced deduction, thereby reducing profits and tax payable.

If the company has large brought-forward losses and is not paying tax, serious consideration should be given as to whether a claim is worthwhile as  the benefit may only be in the form of further losses. The way forward will usually depend on how soon the company expects to be tax-paying. Of course this is something that we discuss with our clients with full consideration of their overall tax position.

R&D Tax Credit Rates

SME Scheme
Date 1st April 2015 1st April 2014 1st April 2012 1st April 2011
R&D Tax Relief 230% 225% 225% 200%
Surrender Rate (for loss-making companies) 14.5% 14.5% 11.0% 12.5%
Benefit for a loss-making company 33.35% 32.63% 24.75% 25.00%
Benefit for a profitable tax payer 26% 25% 25% 20%