R&D Expenditure Credit (RDEC)

The Research and Development Expenditure Credit scheme, also known as RDEC was first introduced in the UK in 2013 (replacing the Large Company Scheme), with the aim to encourage large companies to invest in R&D. Businesses around the UK can reduce their tax bills or claim cash credits as part of their R&D Capital Expenditure.

Though it was originally known as “Above the Line R&D Tax Relief”, the scheme is now known as RDEC Scheme. Any business carrying out research and development practices is likely to be able to claim R&D Expenditure Credit, though most companies choose to trust established tax advisors, in order to guarantee success. CapEx Tax Specialists can help organisations apply for and claim Research and Development Credits.

Research and Development Expenditure Credit is independent of your company’s tax position, and therefore the benefit you’ll receive is easier to forecast. This, in turn, will provide greater stability and make it easier for companies to factor in the relief when they make investment decisions. Another positive characteristic of the RDEC scheme is that it can be used by loss-making companies as well.

What is the RDEC Expenditure Credits Scheme?

The RDEC expenditure credits scheme, or R&D Capital Expenditure scheme, is one of two UK government tax incentives. It works to provide tax relief to companies that are subject to corporation tax, and aims to encourage innovation within larger companies by investing in research and development.

RDEC Scheme

WHAT YOU NEED TO KNOW ABOUT RDEC EXPENDITURE credit

  • An RDEC expenditure credit is worth 13% of your qualifying R&D expenditure.
  • It is taxable at the normal Corporation Tax rate of 19%
  • The benefit can be shown ATL (above the line), which means it is visible as an income in your accounts
  • It is offset against your tax liability or, sometimes, can be payable in cash.

What Qualifies for RDEC Expenditure Credit?

RDEC expenditure credit can be claimed against certain expenses, including consumable items, staff costs (wages, overtime, bonuses, pension contributions and NI contributions), software, and data licencing. For more detailed information on what your business can claim tax relief for through the RDEC scheme, speak to a tax expert such as CapEx Tax.

Man explains SDLT Refunds to client

RDEC Scheme

HOW IS R&D EXPENDITURE CREDIT CALCULATED?

The official RDEC rate is currently 13%. Because it’s paid net of Corporation Tax, the effective RDEC rate you’ll receive is 11p for £1 spent. This rate increased in 2020 from 12% to 13%, which is the third time it increased since the scheme’s introduction. Certainly great news for organisations using the incentive.

CapEx’s tax specialists can help you calculate the potential value of a research and development capital allowances claim for your business. 

How to make a RDEC claim?

You can claim costs for your R&D project from the first day you start working, until you either finish, pause or discard the project. Claim the credit is done through entering expenditure into the full Company Tax Return form (CT600). For periods of 12 or more months, you’ll need to submit a separate claim for each accounting period. Supportive evidence might be required with your claim. It will usually be in the form of a summary explaining how your project: meets the research & development definition, explored advance in science and technology and achieved it, overcame uncertainty in terms of science and technology could not be easily worked out by professionals in the field. CapEx’ tax experts can help your business claim RDEC and save you time and effort with completing documentation. Get in touch with us today.

How Can CapEx Tax Help You Claim Under the RDEC Scheme?

CapEx’s tax experts can help your business identify qualifying activities where your research and development efforts may be eligible for R&D Expenditure Credit tax relief, and can help with through the process of submitting a claim with HMRC.

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