How do I calculate my tax credit claim?

Businesses tend to miss out on R&D tax credits that could be very beneficial to their growth, usually because they don’t know they’re eligible to make a claim or because applying and calculating the credits is often intimidating and complicated. However, with the help of specialist accountants and some software, they can take the rewards they deserve for their contribution.

How are they calculated?

Small businesses, under the SME scheme, are able to receive a government subsidy of up to 26p for every £1 spent on innovation and problem solving. However, there are specific criteria to follow, as in; it has to be of a scientific or technological nature that could give benefits to the entire industry, and not just to the business in question and its position in the market.

Under the SME scheme the rates differ depending on if the company in question is working at a profit or at a loss. If the business is working at a profit the calculation for an R&D tax credit claim goes like this:


X 130% enhancement = £130,000

X 19% Corporate tax rate = £24,700

The £100,000 spend, returns 25% of R&D expenditure to the business, which is beneficial for future investments.

Now, if a business is working at a loss, the qualifying expenditure can return up to 33.35%, as shown below:


X 130% enhancement = £130,000

Enhanced R&D = £230,000

£230,000 x 14.5% = £33,350

Is there something I can use to have an easier time making this calculation?

If it’s getting too complicated for you to calculate your HMRC R&D claim, try a tax credit calculator, which will help you figure out the costs. All you need to do is fill in the needed fields, detail the sum cost of materials, staff cost and CT liability and the calculator will give you a total of R&D spend. After this you can deduct the value of your claim.

Factors to take into consideration

It’s important to take into account that some things can have an impact on your R&D tax credit claim, such as grants and subsidies, which can move the qualifying spend into the Large Company scheme, which means the percentage you claim is reduced.

Consider getting a specialist

As always, if you think you’re eligible for an R&D tax credit claim, you should think about getting some assistance from specialists. M3 partners can help you out with that, making sure you get the credit that your business deserves, and also identifying other projects that could qualify for a relief.