Introduced in 2000, the R&D Tax Relief Scheme for SMEs is the main source of state support in the UK for innovative companies, and aims to encourage their efforts in developing and improving new products and services.
SMEs (According to R&D Tax Relief purposes, an SME has double thresholds respect to the standard European Commission definition):
R&D support for SMEs applies to both profit making and loss making companies
Enhanced deduction of 230% of eligible R&D expenditure from a company’s taxable income
Effective cost reduction of 24.7% after applying the corporate tax rate
Carrying the losses generated forward to offset against a future tax liability
Surrendering the losses for a payable tax credit at a rate of 14.5% (as of 1 April 2015). This could mean the company receives a cash credit equivalent to 35% of what it spent carrying out R&D
Net benefit up to 33.35% of the R&D expenditure