R&D Tax Credits

Research and Development (R&D) Tax Relief is an incentive setup by the government to support and encourage innovative businesses and boost spending with R&D companies. Companies from all sorts of different industries can claim the relief, even on projects that have been unsuccessful, so long as the work is part of a specific project to make an advance in science or technology.

There are different types of R&D relief you can make a claim for, depending on the size of your company and whether or not the project was subcontracted to you. 
 

Small and Medium Enterprises (SME) R&D Relief
SME R&D relief allows companies to deduct an additional 130% of their qualifying costs from their yearly profit on top of their usual 100% deduction, bringing it to a total of 230% 

It also allows them to claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss. You can claim SME R&D relief if you’re a SME with:
Less than 500 employees, A turnover less than £100 million or a balance sheet with a total below £86 million, You may be required to include any linked companies or partnerships when working out if you’re an SME.
 

Research and Development Expenditure Credit
Research and Development Expenditure Credit (RDEC) can be claimed by larger companies working on R&D or SMEs that have been subcontracted work on an R&D project for a large company. The RDEC is a tax credit calculated at 13% of your company’s qualifying R&D expenditure and is taxable. The credit may be used to discharge the liability or result in a cash payment depending on whether your company is profit or loss making.

Salaries
Wages
Class 1 National Insurance contributions
Pension fund contributions
Specialist administrative or support staff who directly help the project
Staff provided by external agencies for the project (65%)

Subcontracted work can be claimed for if it is undertaken by:

A charity
A higher education institute
A scientific research organisation
A health service body
An individual or partnership of individuals

Materials
Utilities