R&D Tax Relief For Loss-Making Companies

Mark Evans, Managing Director at R&D Tax Claims, explains how R&D Tax Relief For Loss-Making Companies can create a valuable cash injection:

‘I am regularly asked by companies that are loss-making, and therefore, not paying any corporation tax whether they can claim R&D Tax relief, the simple answer is yes!’

R&D Tax Relief for Loss-Making Companies

SME Research and Development Tax Relief applies equally to companies who are making a profit and therefore paying corporation tax, as it does to loss-making companies who are not. Loss-making SMEs with R&D activities even have a choice. They can receive a cash credit, known as the R&D Tax Credit, by surrendering their R&D losses arising in the year, or they can carry the extra losses forward to offset against future profits or they can elect for a combination of the two reliefs.

Even though the R&D Tax Credit rate is less than the current rate of Corporation Tax (14.5% verses 19%) the attractive advantage of the R&D Tax Credit is that it is money back from HMRC now, set against paying less tax in the future. Mark commented:

‘We are expects in R&D Tax claims for manufacturing and engineering companies, with most of our clients electing for the R&D Tax Credit in full for that reason, as the cash generated can benefit the company greatly’.

Cash Injection from R&D Tax Credits

A loss-making SME can receive a tax credit of up to 33p per £1 spent of qualifying costs. E.g. If a loss making SME spends £100,000 on R&D activities in a year it can claim an R&D Tax Credit of up to £33,350 even though it may not have paid a penny of Corporation tax in the past! As you can go back 2 years with R&D claims, such a company could be looking at a cash injection from HMRC of almost £70,000!’.

R&D Tax Credits Qualifying Costs

If you are making an R&D Tax Claim, qualifying costs can include direct labour costs including Employers NIC and pension contributions, consumables, sub-contractors, agency workers as well as some utility and travel costs.

In the latest statistics released by HMRC, the average annual tax saving for a UK SME was over £61,000. The same report stated that over the last few years there had been a large increase in the numbers of SMEs claiming R&D tax relief. Despite this, the vast majority of eligible businesses are still not claiming.

Mark Evans, concluded:

‘Many businesses don’t recognise the ease of claiming, thinking that it is too time consuming, complex or that they just don’t qualify. Don’t let it be you! Remember, you don’t even need to have paid tax in order to claim it! If your business takes part in research and development activities, you may be eligible for an R&D tax claim’

For further information email or call 0845 003 0140.

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R&D Tax Claims Explained


Find out how you can claim from the government tax incentive scheme designed to encourage companies to invest in R&D.

About the Scheme

A government incentive that rewards UK companies for spending on innovation.

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The Benefits

Receive a cash credit, lowered corporation tax bill or a combination of the two.

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The Process

Tried and tested process with six easy steps which can be completed in 12 weeks or less.

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Claim Eligibility

Have you developed new or improved products or processes?

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