How Small Businesses Benefit from Claiming R&D Tax Credits

The business world can be tough for small businesses and startups, especially if you’re making a loss. R&D tax credits aim to reward businesses investing in innovation, regardless of how profitable they are. However, it’s thought up to 90% of businesses are not claiming what they’re owed. With thousands of small businesses potentially not even realising the scheme exists, don’t miss out on this financial-boosting HMRC scheme.

What is R&D Tax Relief?

R&D stands for ‘research & development’, and the R&D tax relief scheme was introduced by the government in 2000. The purpose of the scheme is to ensure the UK becomes more globally competitive in the fields of Science and Technology. This could be through technological advancements such as new or enhanced products, services or processes. Those businesses investing in R&D can claim a reduction in their Corporation Tax bill or get cash credits.  Qualifying revenue expenditure includes staff wages, external contractors, software, consumables and sometimes utilities.

Which Small Businesses Qualify?

To qualify under the SME Scheme, there are several criteria you must meet.

  • SMEs are characterised under the scheme as those with less than 500 employees and with a balance sheet under €86million or an annual turnover of under €100million.
  • You must be liable for Corporation Tax and have a UK LTD company.
  • There must have been a degree of technological uncertainty before work began, and no professional in the field had the knowledge or capabilities to make the advancement you were seeking.
  • Your R&D project took place within the company’s last two financial years. 

Benefits of the SME Scheme  


SMEs can reclaim up to 33% on qualifying project expenditure, rewarding them for their R&D investments. Before you start the claims process, you can even calculate the R&D tax relief you could be owed.


You can still claim for R&D tax credits if you’re making a loss. In these circumstances, you’ll often receive a cash sum instead, which can significantly boost a company’s finances. It also doesn’t matter if the project was successful or not, or had to be abandoned before completion. The point of the SME scheme is to reward companies who invest in R&D aimed towards technological advancements, regardless of the project outcome.


Using R&D tax credits to grow your business can be a really smart move for small businesses. Many companies use the relief to keep investing in R&D projects, creating further technological advancements. This positive business cycle allows businesses to grow and helps with progression across the various sectors involved. Science and Technology affects a wide variety of industries from Software and Engineering, through to Food and Drink, Manufacturing and Aviation, to name a few. 

Making a claim for R&D tax credits

Submitting a claim to HMRC is something any business can do themselves. However, many choose to use specialist help to save them time, simplify the process, and to ensure they’re claiming for everything owed. R&D tax relief experts can give you more information on R&D tax credits and provide the support required to ensure your claim is successful.

If you’re a small business, take advantage of this fantastic scheme.


Author Bio

Evgeni Vachkov is the Business Operations Director at R&D Tax Solutions, a specialist claims consultancy for SMEs and larger corporations alike.  For approximately 15 years he has consulted to blue-chip companies in the area of software development and implementation of large-scale global IT projects.  Now, Evgeni assists businesses to analyse and unveil information about their projects, which can help build a strong R&D tax claim.