Will my business qualify for the SME scheme or RDEC scheme?
It is important that companies make a Research and Development (R&D) tax relief claim under the correct scheme. However, navigating the world of R&D tax reliefs can be complex, especially when it comes to determining which scheme – the Small and Medium Enterprises (SME) scheme or the Research and Development Expenditure Credit (RDEC) – is the most suitable for your business. The answer hinges on your business’s size and structure and the nature of your R&D activities.
There are two scenarios where companies are not defined as SMEs through size, instead qualifying as a large company (LC). These are as follows:
Scenario 1:
- More than 500 FTE staff
AND:
- Turnover in excess of €100 million
OR:
- Gross balance sheet assets in excess of €86 million
Scenario 2:
- Fewer than 500 FTE staff
AND:
- Turnover in excess of €100 million
AND:
- Gross balance sheet assets in excess of €86 million
For standalone companies, the sizing tests are often straightforward to work through. However, careful consideration needs to be taken for companies that are part of a group – specifically those with partner enterprises and linked enterprises. At Moore R&D, we have a strong understanding of how to analyse group structures and ensure that your business is claiming under the correct scheme.
There are also scenarios which require companies that are technically an SME in size to make a claim, in part or in full, under the RDEC scheme. These scenarios are covered in the following resources: [Enter hyperlinks to ‘Can my business make a claim under the SME scheme despite receiving grant income?’ and ‘Can I claim for work that has been subcontracted to my company?’].
As we have already mentioned, the size of your business is not the only determinant. The nature of your R&D activities also plays a crucial role. Both schemes require your business to be working on projects that seek to achieve an advance in science or technology. You must be resolving scientific or technological uncertainties; this means your business is not merely developing new processes, materials, devices, products or services, or appreciably improving existing ones, but your business is genuinely innovating in a field of science or technology.
The nuances of these schemes can be challenging to navigate alone. Whether you are an SME considering applying for R&D tax relief, or a larger company or subcontractor looking at the RDEC scheme, our experts can guide you through the process to ensure your entitlement has been maximised. Contact us today to find out which R&D tax relief scheme your business qualifies for.
