With the UK’s introduction of a new merged R&D tax credit scheme effective from 1 April 2024, your business stands to benefit significantly from simplified and generous incentives.
This single scheme replaces the previous SME and RDEC schemes, standardising the benefits across all company sizes.
Under the new regime, companies can receive a 20 per cent credit rate on their qualifying R&D expenditures, which can be recognised as taxable income, thus providing better visibility in financial statements.
For loss-making companies, the notional tax rate applied to the R&D credit will be 19 per cent, enhancing the cash benefit up to 16.2 per cent of qualifying spend.
Qualifying activities include any project aimed at advancing science or technology, covering costs such as staff, materials, software, and relevant overheads.
Unlike the old SME scheme, the new regime does not reduce relief for subsidised R&D, meaning you can claim full relief even if your R&D projects are grant-funded or subcontracted.
However, the rules for applying for R&D relief as a foreign company are highly complicated, so we recommend discussing these with your international tax adviser before making the move to the UK.
Leveraging the Patent Box regime
In addition to the new R&D tax credit scheme, the UK’s Patent Box regime remains a valuable incentive.
This regime allows you to apply a reduced rate of Corporation Tax to profits earned from patented inventions, with the effective tax rate potentially as low as 10 per cent.
To benefit, your company must own or exclusively license patents granted by recognised patent offices, such as the UK Intellectual Property Office or the European Patent Office.
Utilising the Patent Box can significantly increase your profitability from innovative products, freeing up resources for further R&D investments and other business areas.
This not only boosts your bottom line but also promotes continuous innovation, positioning your business favourably in a competitive market.
Accessing grants and funding opportunities
The UK offers a variety of grants and funding opportunities to support R&D activities, from organisations like Innovate UK to regional development funds.
These grants can provide substantial financial backing for your R&D projects, often without repayment obligations.
Additionally, the UK’s robust network of universities and research institutions gives you plenty of opportunities for collaboration.
Partnering with these entities can grant you access to cutting-edge research, state-of-the-art facilities, and highly skilled personnel – all of which goes into enhancing your R&D efforts.
However, the complexities associated with these new regulations and opportunities can be challenging.
Engaging with an international tax adviser, who can guide your business expansion in all aspects of tax, will help you maximise your entitlements and ensure compliance, ultimately supporting your business growth in the UK.
We can give you tailored advice specific to your business’s unique expansion projects and help you set up in the UK.
We’ll also be able to tell you which projects will be eligible for UK R&D tax relief and help you make claims.
