The relief works by providing an uplift on the costs incurred on qualifying R&D activity to provide a tax deduction or cash refund.
There are two schemes for R&D, and both have different levels of relief. If you’re an SME (in the eyes of HMRC, this means less than 500 employees, with a balance sheet of less than €86m, or a turnover less than €100m) you’re entitled to a 130% uplift on qualifying expenditure. This offers a benefit of up to 33p for every £1 spent on qualifying R&D. If you’re a loss-making company, you can surrender taxable losses in return for a cash repayment of 14.5%
For large companies or those in receipt of certain grants, the RDEC scheme offers a tax credit of 12% of the qualifying expenditure (meaning its worth up to 10p for every £1 spent on qualifying R&D).