R&D Tax credit rates and allowances 2023
Share this article
The calculation of tax benefit from a R&D tax relief claim can be complicated. The R&D tax credit rates of relief differ between the two schemes, and for companies in profit and those in a loss-making position (for more information on the different schemes, see R&D Tax Credits Guide 2023). WhisperClaims does not calculate the tax benefit of the claim, because it is important that you, the advisor, work with your client to agree the best way for them to benefit from the scheme. However, good tax advice starts with robust figures, and the eligible spend figures calculated by WhisperClaims are robust and defensible.
Current R&D tax credit rates of relief
| From 1st April 2023 | To 31st March 2023 | ||
| SME | Enhancement rate | 86% | 130% |
| Tax credit rate | 10%* | 14.5% | |
| RDEC | Tax credit rate | 20% | 13% |
* Higher rate of relief available to R&D intensive companies
How to calculate the tax benefit
Profit-making SME example
- Business made profits of £250,000 for the year
- Corporation tax (25%) due before R&D claim = £62,500
- Business has £100,000 of eligible expenditure
- SME enhancement rate 186%
Calculation
| Profit before R&D | £250,000 |
| Enhanced deduction* | (£86,000) |
| Revised Profit | £164,000 |
| Corporation tax at 25% | £41,000 |
| Tax benefit | £21,500 |
* £100,000 x 86% = £86,000. However, £100,000 of costs are already included in the profit figure so only £860,000 should be deducted
Loss making SME example
- Business made loss of £250,000 for the year
- Business has £100,000 of eligible expenditure
- SME enhancement rate 186%
- Surrender credit 10% of enhanced R&D costs
Calculation
| Loss before R&D | (£250,000) |
| Enhanced deduction* | (£86,000) |
| Revised Loss | (£336,000) |
| Maximum losses available to surrender** | (£186,000) |
| Tax credit received | £18,600 |
* £100,000 x 186% = £186,000. However, £100,000 of costs are already included in the profit figure so only £86,000 should be deducted
** £100,000 x 186% = £186,000. Surrendered losses cannot exceed the enhanced expenditure.
RDEC example
- Business has £100,000 of eligible expenditure
- Business has turnover of £500,000
- Business made profit before R&D of £300,000 for the year
- Tax credit rate 20%
Calculation
| Turnover | £500,000 |
| R&D expenditure | £100,000 |
| Other expenditure | £100,000 |
| Profit/(Loss) before tax | £300,000 |
| RDEC at 20% | £20,000 |
| Profit/(Loss) before tax | £320,000 |
| Tax charged at 25% | £80,000 |
| RDEC credit | (£20,000) |
| Tax payable | £60,000 |
| Net tax benefit* | £15,000 |
* Tax payable without RDEC £300,000 x 25% = £75,000
WhisperClaims | Operations Director
Jen has spent the past nine years working in and around the R&D tax credit industry, and in that time has prepared hundreds of claims for companies of all shapes, sizes, colours and flavours. She’s passionate about making sure all of the users of the WhisperClaims app have the information and training they need to produce robust and compliant claims.
Share this article
