Background Note
3.Additional tax relief for expenditure on research and development (R&D) was introduced in 2000 for SMEs.
4.The SME R&D relief currently gives an additional deduction from profits at a rate of 125 per cent of the qualifying expenditure. This combined with the normal deduction for such expenditure, gives a total deduction of 225 per cent.
5.A loss-making SME is able to obtain a payable R&D tax credit at a rate of 11 per cent of the lower of its trading loss for the period and 225% of the qualifying R&D expenditure incurred, giving a maximum payment of 24.75 per cent of the original expenditure. The rate of payable credit is to be increased to 14.5 per cent for expenditure incurred on or after 1 April 2014, giving a maximum payment of 32.625 per cent of the original expenditure.