At a glance
R&D Expenditure Credit or ‘RDEC’ for large companies offers a repayable credit of 20% of qualifying expenditure. The credit itself is taxable and so the net cash receipt is 15% (after Corporation Tax at 25%).
The company must be seeking an overall advance (or appreciable improvement) in technology or science via the resolution of technological or scientific uncertainty.
Who can claim? Until when?
The ‘old’ RDEC regime is being phased out and most companies will claim under the new reformed RDEC or the enhanced R&D intensive support going forward. These new regimes apply for accounting periods commencing on or after 1st April 2024.
What is qualifying R&D?
Examples of qualifying R&D activities might include:
- Challenging developmental activities that go beyond known techniques
- Developing new materials, products or manufacturing processes that offer improved performance, increased outputs and efficiencies, or reduced waste, costs etc.
- Iterative development or ‘trial and error’ – note that the R&D doesn’t have to be successful to qualify
- Application of an existing technology in a new field of science, where the competent professionals did not know whether it was feasible / how to achieve it in practice
Patents are also a good indication that qualifying R&D has taken place.
Qualifying costs
Once eligible R&D activities are understood, the associated costs can be identified.
Qualifying costs can include:
- staff costs
- agency workers
- consumable items including prototypes and materials used up as part of the R&D
- software licenses and utilities
How it works
Claims are made annually for each accounting period as part of a company’s tax return. Companies have 2 years to file claims, for example a December 2017 year end claim must be filed by 31 December 2019.
Preparing 2 years claims together is often most efficient, minimising the time required from the business.
A word of caution
How costs are accounted for can impact claims – consult early to ensure this isn’t a problem.
See our credentials to read about how we have helped other companies like you.
