R&D tax relief and Patent Box
Driving value through innovation
The UK Government is committed to making the UK a competitive place to innovate and grow. A range of incentives are now available to enhance tax relief due, or provide cash credits, to companies of all size who are involved in innovation.
Is your business undertaking R&D activities and/or generating revenues from patented technologies? Deloitte's award winning Innovation Tax team can work with you to make the most of the incentives offered.
The UK Government has pledged its support to an economic growth strategy led by innovation; at each stage of the innovation lifecycle, incentives play an important role in stimulating activity and are great news for innovators.
Regardless of your industry, if your company is developing new products, processes, materials or services in the UK, there is a good chance that you may be able to claim UK R&D tax relief.
Contact us to discuss how your company can access innovation tax relief.
Understanding the incentives for innovation
- R&D tax relief: companies can benefit from up to 26% of the R&D spend for small or medium sized companies and up to 8.8% for large companies. Cash credits are also available for companies that are making tax losses
- R&D allowances: accelerated tax relief in the form of a 100% capital allowance is available for capital equipment and buildings used for R&D
- Patent box relief: companies can benefit from a lower rate of corporation tax on profits earned from patented technologies.
- R&D Grants: Assistance can cover up to 50% of eligible costs for large companies while small or medium sized businesses may qualify for up to 70%.
There are many other similar incentives available around the world. If you also have development activities in other countries and would like to explore potential opportunities, further details can be found in our Global R&D Survey.
Empowering SMEs: Tax relief for innovation
Companies that fall within the definition of a Small or Medium sized Enterprise (SME) can deduct a multiple of their qualifying R&D costs when calculating their taxable profit.
If an SME is making losses, those enhanced tax deductions can be surrendered for a cash credit of up to one third of the associated costs
Enabling larger companies: Key information on R&D tax relief
Large companies, or SMEs who have costs that are excluded from the SME regime, can claim under one of the large company regimes, either deducting a multiple of their qualifying R&D costs when calculating their taxable profits, or by claiming a taxable R&D Expenditure Credit (RDEC).
Under the RDEC regime, large companies that do not have a tax liability can choose to claim a proportion of the credit as a cash amount.
Grants and Incentives: global developments benefiting business
Deloitte produces a monthly publication which provides a summary of updates on the latest global developments in R&D credits, grants and other inventive arrangements. More than 50 countries offer specific incentives, and this publication focuses on identifying and outlining what the right incentives could be for your organisation.
What is patent box?
The Patent Box legislation was introduced by the UK Government to encourage innovation by providing an incentive for companies to “locate their high-value jobs associated with the development, manufacture and exploitation of patents in the UK and maintain the UK’s position as a world leader in patented technologies”.
Since April 2013, the Patent Box provides a lower effective rate of corporation tax on profits attributable to UK or certain European patents.
New rules were introduced with effect from June 2016 which changed the current regime to ensure that the benefit is more closely linked to the level of development activity undertaken in the claimant company. Companies who qualified before June 2016 are however grandfathered within the existing regime until 2021.
Deloitte Innovation Tax team - how can we help?
Preparing robust, effective and optimal R&D, Patent Box or grant claims can be a complex task.
The award-winning Deloitte Innovation tax practice is the largest and most experienced team in the UK, with a coordinated national presence of skilled patent attorneys and technical and scientific experts. Our team also includes transfer pricing and international tax experts.
Contact our experts to discover how Patent Box and R&D tax incentives can apply to your business.