--- title: R&D tax relief for American Companies description: Many UK companies have subsidiary or sister companies in the US, so does R&D tax relief differ for UK and American Companies? image: https://blog.shorts.uk.com/hubfs/Stock%20images/Business%20in%20America.jpeg --- [![Shorts_logo_White](https://blog.shorts.uk.com/hubfs/New%20Site%202018/Shorts_logo_White.svg "Shorts_logo_White")](https://www.shorts.uk.com/) [Blogs & News](https://blog.shorts.uk.com/) > [RADIUS - R&D Tax Relief & Patent Box](https://blog.shorts.uk.com/topic/radius-rd-tax-relief-patent-box) # R&D tax relief for American Companies Darryl Hoy - 7 November 2019 ###### Select topic - Please Select - [ Audit ](https://blog.shorts.uk.com/topic/audit) [ Business Taxes ](https://blog.shorts.uk.com/topic/business-taxes) [ Radius – R&D Tax Relief & Patent Box ](https://blog.shorts.uk.com/topic/radius-rd-tax-relief-patent-box) [ Corporate Finance ](https://blog.shorts.uk.com/topic/corporate-finance) [ GENUS Management Accounts ](https://blog.shorts.uk.com/topic/genus-management-accounts) [ VAT ](https://blog.shorts.uk.com/topic/vat) [ Private Client ](https://blog.shorts.uk.com/topic/private-client) [ Payroll ](https://blog.shorts.uk.com/topic/payroll) [ EOT ](https://blog.shorts.uk.com/topic/eot) [ International Taxes ](https://blog.shorts.uk.com/topic/international-taxes) ![featured image](https://blog.shorts.uk.com/hubfs/Stock%20images/Business%20in%20America.jpeg) Many UK Companies have subsidiary or sister companies in the US and here we examine some of the similarities and differences between the R&D tax relief regimes for UK and American Companies. The main difference between the UK and US tax system is that the US has Federal and State taxes. Here we are concentrating solely on Federal tax but it should be noted that several states offer R&D incentives too. At Federal level, the first R&D relief was introduced back in 1981, almost 20 years before the UK introduced R&D tax relief, however, the relief was not made permanent until 2015.   ## Comparing eligibility The relief is available to companies of all sizes, unlike the UK where we have a different system for very large companies. As in the UK it applies across most industries, with manufacturing, software and technology seeing some of the biggest claims – engineers, contractors and banks etc are also amongst those who commonly benefit. Similar to the UK regime, for SMEs the US relief operates via an enhanced deduction for qualifying costs on qualifying projects. Qualifying costs, again as in the UK, include staff costs (for staff performing, supporting or directing technological research), the cost of supplies used in performing research and the cost of contracted out research, where this is undertaken at the taxpayer’s risk and expense. As for the UK SME regime, there is no relief available for funded research – the taxpayer must have the financial risk. (There are specific exclusions here in certain group situations.)   ## Rates of relief One of the most significant differences between the UK and US regimes is the value of the relief which in the US typically equates to 4.5-6.5% of the qualifying expenses. In the UK, the benefit can be almost 25% (although the additional State R&D incentives also need to be factored in here).   ## Comparing qualifying projects There are many similarities between the two countries when considering the definition of a qualifying R&D project. Firstly, the research must be intended to be useful in developing a new business component – this is similar to the UK’s requirement that the project be for the benefit of the taxpayer’s trade. Second, the research must be technological and relate to the hard sciences – in the UK the R&D must relate to science (i.e. material sciences) or technology (the practical application of science). The US regime requires uncertainty over the proposed development at the outset of the project and the UK has a similar requirement for technological uncertainty. Finally, there must be a process of experimentation to eliminate the uncertainties, which is similar to the UK regime requiring a project, i.e. a number of activities conducted to a plan.   ## Examples of qualifying projects in both countries: - New product development or improved products - Software development - Process automation - Development of manufacturing processes - Scale up activities As in the UK there is no requirement to keep records in a specific format – rather, taxpayers are expected to retain documentation which supports the costs included in the claim, and to maintain project narrative to explain why the project qualifies. This highlights some of the opportunities available for US companies undertaking R&D work. If you have any questions over this, or any aspect of [UK R&D tax relief](https://www.shorts.uk.com/radius/), please get in touch with a member of our [Radius team](https://www.shorts.uk.com/about/team/?person_name=&department=radius-rd-patent-box&position=). [![Claim your free consultation](https://no-cache.hubspot.com/cta/default/2442072/2be555ab-96dd-4835-920d-554fd09cb413.png)](https://cta-redirect.hubspot.com/cta/redirect/2442072/2be555ab-96dd-4835-920d-554fd09cb413) Other related news: - [Research and development Tax Relief - how to identify qualifying costs](https://blog.shorts.uk.com/research-and-development-tax-credit-qualifying-rd-costs) - [How our Radius team save £millions with R&D Tax Relief claims](https://blog.shorts.uk.com/rd-tax-relief-case-studies-how-we-save-tax) - [15 ways to reduce your Corporation Tax liability](https://blog.shorts.uk.com/15-ways-to-reduce-corporation-tax) - [Grant funding and R&D tax relief  - can you claim both?](https://blog.shorts.uk.com/grant-funding-rd-tax-relief-can-you-claim-both) ![author](https://blog.shorts.uk.com/hubfs/darryl.png) #### Darryl Hoy Darryl is the Technical Director of the Radius team. He is a specialist in Research & Development tax reliefs, having previously worked at HMRC as an R&D Tax Inspector. [View my articles](https://blog.shorts.uk.com/author/darryl-hoy) Tags: [RADIUS - R&D Tax Relief & Patent Box](https://blog.shorts.uk.com/topic/radius-rd-tax-relief-patent-box), [Business Taxes](https://blog.shorts.uk.com/topic/business-taxes) Share this on - - - [Questions? Get in touch with us](https://www.shorts.uk.com/contact/) ###### Tax Saving Guide 2026-27 Written especially for entrepreneurs and owner-managed businesses, this guide is full of planning ideas and tax risks to avoid. [ Download now ](https://info.shorts.uk.com/en-gb/tax-saving-guide) ![Tax saving guide 2026-27](https://blog.shorts.uk.com/hs-fs/hubfs/Tax%20saving%20guide%202024.jpg?width=375&height=465&name=Tax%20saving%20guide%202024.jpg) ###### Related articles ##### [What’s the difference between SME and RDEC Schemes?](https://blog.shorts.uk.com/difference-between-sme-and-rdec-schemes) ##### [R&D Tax Reliefs for Logistics](https://blog.shorts.uk.com/rd-tax-relief-innovation-in-logistics) ##### [Combine R&D Tax Credits with Patent Box](https://blog.shorts.uk.com/combining-rd-tax-credits-with-patent-box) ##### [Patent Box for Manufacturing Companies](https://blog.shorts.uk.com/patent-box-for-manufacturing-companies) ###### Latest articles [A case of aggressive tax avoidance: Glasgow Rangers Football Club](https://blog.shorts.uk.com/aggressive-tax-avoidance-affect-you) [What is VAT? - Complete Guide (Updated for 2025/26)](https://blog.shorts.uk.com/what-is-vat) [Ashgate Hospice Sparkle Night Walk 2026](https://blog.shorts.uk.com/ashgate-hospice-sparkle-night-walk-2026) [Stocktaking guide for UK businesses](https://blog.shorts.uk.com/stocktaking-guide-for-uk-businesses) [Supporting the Chatsworth Cascade for future generations](https://blog.shorts.uk.com/supporting-the-chatsworth-cascade-for-future-generations) [Deal of the Year win at Insider Dealmakers Awards 2026](https://blog.shorts.uk.com/deal-of-the-year-win-at-insider-dealmakers-awards-2026) [Football shirt Wednesday: Backing England in style](https://blog.shorts.uk.com/football-shirt-wednesday-backing-england-in-style) [Understanding lifetime trusts: the basics](https://blog.shorts.uk.com/understanding-lifetime-trusts-the-basics) [Close company directors face new HMRC detail requirements in 2026](https://blog.shorts.uk.com/close-company-directors-face-new-hmrc-detail-requirements-in-2026) [Shorts advise Harris Irwin Architects on successful growth funding.](https://blog.shorts.uk.com/shorts-advise-harris-irwin-architects-on-successful-growth-funding) #### About Us Use this little footer to reinforce your message about who you are and why people love working with you. 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