This Is All We Do. Every Single Day.
At Lumo, we focus solely on helping businesses like yours maximise their R&D tax credit claims. Our expertise ensures you receive the maximum benefit for your innovation, helping fuel growth and secure your company’s future.
Why Choose Lumo?
With a deep understanding of R&D tax credits and years of experience, we make the process simple and hassle-free for SMEs across the UK. Whether you’re innovating in technology, manufacturing, or any other sector, we’ll guide you every step of the way to ensure you benefit from R&D tax relief.
The Power of R&D Tax Relief
R&D tax credits are part of the UK government’s commitment to supporting innovation. Since 2000, they have helped businesses reduce costs and improve cash flow by providing tax relief on eligible R&D activities. Whether it’s through reduced tax liability or a cash credit, R&D tax credits can make a significant difference to your bottom line.
Determining Company Size for Tax Relief
The eligibility for SME R&D tax relief hinges on several factors, including:
- Staff Headcount: Your company must employ fewer than 500 individuals.
- Financial Metrics: Your turnover should not exceed €100 million, or your balance sheet total should be less than €86 million.
If your accounts are prepared in sterling, these figures must be converted to euros using the exchange rate for the balance sheet date.
Additional Eligibility Criteria
In addition to size constraints, your company must meet several other eligibility criteria, including:
- Your company must fall under the UK Corporation Tax jurisdiction.
- It must be a going concern, actively engaged in business operations.
- Your company must exclusively operate within the sector to which the qualifying R&D expenditure relates.
The R&D projects in question must not have been contracted to your company, and the expenditure incurred should be classified as revenue in nature, with no grants or subsidies contributing to it.
Project Eligibility Criteria
HMRC has stringent guidelines regarding the eligibility of R&D projects for tax relief. To qualify, a project must:
- The project must create or modify a product, process, or service.
- It should resolve scientific or technological uncertainties.
- The project should advance beyond existing practices within the relevant sector, contributing to broader knowledge or capability.
Estimating Tax Relief
Understanding the potential tax relief is crucial for determining the feasibility of claiming R&D credits. The nature of relief depends on your company’s financial status:
If your company is experiencing losses, you have several options, including carrying losses back or forward, or surrendering them for a cash credit.
Prior to 2023, non-‘R&D intensive’ SMEs received an effective credit of 33.35%. However, changes introduced in the 2022 and 2023 Autumn Statements reduced this figure to 18.6% and subsequently to 16.2%.
Beginning in the 2024/25 tax year, ‘R&D Intensive’ businesses benefit from a grace period, maintaining higher relief rates for one year, simplifying accounting for fluctuating R&D intensity.
Ensuring Compliance
HMRC’s heightened scrutiny underscores the importance of meticulous compliance when claiming R&D tax relief. Even minor errors can lead to significant consequences.
Therefore, seeking professional assistance is paramount to navigating the complex world of R&D tax relief effectively.
How Can We Help?
At Lumo, we’re more than just advisors; we’re your partners in innovation. We’re here to help demystify R&D tax relief and empower your business to thrive. Contact us today for personalised guidance tailored to your needs.
