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Research & Development Tax Relief

Research and development (R&D) tax relief is intended to drive UK productivity by encouraging innovation.

What is Research and Development Tax Relief?

R&D tax credits and relief are available to businesses for expenditure of a revenue nature (that is, expensed through the profit and loss account) on R&D activities related to a company’s trade.

Subject to the detailed rules, this can include expenditure on:

  • Staff costs (i.e. salaries etc.)
  • Consumable items (i.e. materials or equipment consumed during the R&D process),
  • Software used in the R&D, and
  • Payments to externally provided workers/sub-contractors carrying out R&D for the business.

How LBW can assist with your claim

  • LBW work in partnership with specialist Research & Development technicians in order to maximise your qualifying expenditure.
  • Within 10 minutes of reviewing your case, our experts can advise if a claim is viable.
  • The claim is then worked out and included on your corporation tax return with very little input from you the client.



Rate of Tax Relief or Credit

  • The tax relief on allowable R&D costs incurred after 1 April 2015 is 230%.
  • For every £100 of qualifying costs, your company can reduce its corporation tax profit by an additional £130 on top of the £100 spent.
  • If there is a taxable loss for the period, this can be increased by 130% of the qualifying R&D costs.
  • This loss can be carried forward in the normal way and offset against future taxable profits or can be converted to tax credits payable to the company by HMRC.

Talk to us about Research and Development tax relief

If you have any questions in relation to R&D tax relief or credits, or would like to investigate the possibly of a claim, then please feel free to contact Gary Cullen on 0151-644-4848, or contact us here.

Illustration 1

R&D Relief for expenditure of £20,000 where the company has made a profit of £30,000:

Calculation Step
R&D Expenditure
R&D Relief
£20,000 x 130% = £26,000
Normal taxable profits
Taxable profit less R&D relief
£30,000 - £26,000 = £4,000
Revised taxable profits


Illustration 2

If your company makes a loss, the company can choose to receive the tax relief by way of tax credits – a cash sum paid to the company by HMRC.

Converting R&D Relief on expenditure of £20,000 to a tax credit payment:

Calculation Step
R&D Expenditure
R&D Enhancement
£20,000 x 130% = £26,000
Normal taxable profits
Trading loss (after R&D Relief)
R&D Expenditure qualifying for conversion to credits
Payable tax credit
£21,000 x 14.5% = £3,045


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