Put simply, yes, they can. In fact, R&D tax credits can be a very valuable source of cash for loss-making companies that can help them on the journey to become profitable.

Under the R&D tax credit scheme for SME’s (which HMRC define as businesses of less than 500 employees and less than 100 million Euro’s turnover), the benefit reduces your taxable profits but if you are loss-making then you can’t do this. However, in some cases, loss-making companies can claim a cash credit instead.

Different ways that you can receive your tax benefit

Through the SME R&D tax credit scheme you can receive the tax benefit a variety of ways:

  • Cash rebate – This is the most common situation for profitable companies, where you get a refund related to your previous two financial years.
  • Cash credit – This is a great option for loss-making businesses who haven’t yet paid any Corporation Tax. You can obtain a cash payment by surrendering your R&D enhanced losses which can offer a cash boost of up to 33% of the R&D spend. This can be a particularly attractive option compared to obtaining additional loans or external funding.
  • Corporation tax saving – if you are claiming within the same tax period, you can receive a corporation tax saving which can be used to reduce or remove your corporation tax liability.
  • Loss relief – if you were previously profit making then you can carry your R&D losses to the previous period to create a tax rebate. You can also carry it forward to offset it against future profits which can offer improved value in the future. Alternatively, you can utilise it for group relief to receive the benefit sooner.
  • Combined solution – this is a flexible option that in circumstances can allow you to combine some of the above options to maximise the benefit.

Which is best for you?

Which form of tax benefit you opt for will differ greatly by business as it varies depending on your circumstances. Deciding which method to use is not always straightforward as you will need to understand and assess the short and longer-term benefits, and then weigh these up against the requirement for a cash injection.

Here to help

At TEQ Group, we are R&D tax credit specialists and we can help you to understand what you are entitled to, how to maximise your entitlement and which method is the best way to claim the tax benefit.

We offer our services at no upfront cost and we only take a fee once your claim has been paid. There really is nothing to lose in contacting us for a free, no-obligation assessment. To find out more contact TEQ Group today on 01423 815299 or click the button below and we’ll be happy to offer some advice.


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