Research and development (R&D) tax credits were once a little-known tax incentive for companies which invested in innovation. But after rule changes in recent years, and a push by many tax advisers, they are now much more widely understood and used.
They may no longer be much of a secret, but they are still a remarkably effective way for innovative companies to get something extra back from the tax system. Here’s a look at how they work, what the benefits are and what the future might hold for R&D tax credits.
There are two R&D tax credit schemes – nominally, one for smaller companies called the SME scheme, and one for larger companies called RDEC (that’s short for research and development expenditure credit).
Actually, RDEC can also be of use as a fallback option to smaller companies that do not qualify for the SME scheme on a technicality.