R&D tax credits for Startups

R&D tax credits provide valuable financial incentives for startups engaged in research and development activities. Here’s how startups can claim these credits:

• Qualification Criteria:
• Most startups qualify for R&D tax relief if they meet certain criteria. These include being an SME (small or medium-sized enterprise) with fewer than 500 personnel and a turnover of €100 million or less.
• Additionally, startups must demonstrate that their project aligns with the standard definition of research and development for tax purposes.
• Types of Relief:
• SME R&D Tax Relief: Startups can deduct an extra 86% of their qualifying R&D costs from their yearly profit, in addition to the normal 100% deduction. This totals a potential 186% tax deduction.
• If a qualifying SME has claimed relief and made a loss, they can also claim a payable tax credit worth up to 10% of the surrenderable loss.
• Project Eligibility:
• The work that qualifies for R&D tax relief must be part of a specific project aimed at making an advance in science or technology.
• The project must relate to the startup’s trade, either an existing one or one they intend to start based on the R&D results.
• To claim, startups need to explain how their project:
• Looked for an advance in the field.
• Overcame scientific or technological uncertainty.
• Could not be easily worked out by a professional in the field.
• Enhanced Incentives:
• Each £1 spent on R&D is now deductible at a rate of 186% for small businesses.
• Loss-making SMEs can be considered R&D intensive if qualifying R&D expenditure is 30% of their total expenditure.

Remember, R&D tax credits can significantly reduce a startup’s tax liability and encourage innovation. If you have any questions, feel free to get in touch with us! 🔬🚀