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Research and Development tax relief for limited companies.
Investing in research and development can help to develop new innovations and products which will lead to business growth.
Research and Development tax relief is a Corporation Tax relief that may reduce your company’s tax bill. It can also provide a cash payment for companies that don’t pay Corporation Tax because they make a loss.

To qualify for R&D tax relief you need to be able to show:
  • What’s the scientific or technological advance that is being sought?
  • What are the scientific or technological uncertainties involved?
  • Why is this knowledge not readily deducible by a competent professional in this subject?

Also, by the end of the project you should hold evidence showing how and when these uncertainties were actually overcome.

You can find more information about showing your company qualifies in the Corporate Intangibles Research and Development Manual

Corporate Intangibles Research and Development Manual

There are 2 different schemes. The Small and Medium-sized Enterprise Scheme and the Research and Development Expenditure Credit. The SME Scheme is the one that applies to most companies: Research and Development tax relief for small and medium-sized enterprises. If this is not for you, find out if you qualify for the large company scheme Research and Development expenditure credit.

Research and Development Small and Medium-sized Enterprise Scheme

The SME Scheme is for companies with under 500 employees, who have an annual turnover of under 100 million Euros and have a balance sheet under 86 million Euros. Or, the company is part of a larger enterprise that when taken as a whole would not fail these tests.
There are 2 things needed for a successful claim, a qualifying project and qualifying costs.

Raising finance: Tax reliefs for your investors.

Seed Enterprise Investment Scheme (SEIS)

The Seed Enterprise Investment Scheme (SEIS) is designed to help small, early-stage companies raise equity finance by offering tax reliefs to individual investors who purchase new shares in those companies. SEIS is intended to recognise the particular difficulties which very early stage companies face in attracting investment, by offering tax relief at a higher rate Venture capital schemes

Income Tax relief is available to individuals who subscribe for qualifying shares in a company which meets the SEIS requirements, and who have UK tax liability against which to set the relief. Investors don’t need to be UK resident.
The shares must be held for a period of 3 years, from date of issue, for relief to be retained. If they are disposed of within that 3 year period, or if any of the qualifying conditions cease to be met during that period, relief will be withdrawn or reduced.
Relief is available at 50% of the cost of the shares, on a maximum annual investment of £100,000. The relief is given by way of a reduction of tax liability, providing there is sufficient tax liability against which to set it. A claim to relief can be made up to 5 years after the 31 January following the tax year in which the investment was made.

Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme (EIS) is designed to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies. There’s more detailed guidance in the Venture Capital Schemes Manual (VCM) Venture Capital Schemes manual

Employee share incentives

Some companies use employee share incentives to engage, recruit and retain their workforce, which can help a company grow. If you offer your employees company shares, they could get tax advantages, like not paying Income Tax or National Insurance on their value.
Tax advantages only apply if the shares are offered through the following schemes:

  • Share Incentive Plans
  • Save As You Earn (SAYE)
  • Company Share Option Plans
  • Enterprise Management Incentives (EMIs)

There are also tax advantages if you’re an employee shareholder.

Employment Allowance

You could get up to £3,000 a year off your National Insurance bill if you’re an employer. Eligible businesses can now reduce their employer Class 1 National Insurance bill by £3,000 every year by claiming Employment Allowance . You can check if you qualify on the GOV.UK website Employment Allowance

If you claimed the Employment Allowance for 2015-16 it automatically applies for future years, until you tell us otherwise.
From April 2016 incorporated companies where the sole paid employee is the director will now be excluded from receiving the Employment Allowance.