Is there a limit to the amount of R&D tax credit I can claim for?

From 1 April 2021, HMRC introduced a cap on certain payable R&D tax credits. The limit was introduced to reduce the level of abuse regarding the R&D incentive scheme while ensuring that UK businesses who are carrying out genuine UK-based research and development continue to receive the correct support. 

The cap sets the maximum amount at £20,000 plus 300% of the company’s total PAYE and NIC liability for the year. This depends on the company’s total PAYE and National Insurance contributions for that period.

The PAYE and NIC liabilities used in the calculation generally relate to employees engaged by the claimant company. This means businesses undertaking genuine R&D activities in the UK, with employees contributing to qualifying projects, will often have sufficient PAYE and NIC liabilities to support their claim. Companies with little or no UK payroll should review the potential impact of the cap before submitting a claim. 

The cap does not prevent a company from claiming R&D tax relief. Instead, it limits the amount of payable credit that can be received in a single accounting period. Under the Merged R&D Scheme, any capped excess can often be carried forward to the next year rather than being lost entirely. 

There are also some exemptions from the PAYE and NIC cap in certain circumstances. 

For example, companies that meet HMRC’s criteria for being R&D intensive may qualify for relief under the Enhanced R&D Intensive Support (ERIS) regime, where different rules apply. As with all R&D tax relief claims, eligibility should be assessed against the legislation and HMRC’s guidance for the relevant accounting period.