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What are the R&D tax credit rates for the RDEC scheme?

by Anna Szymańska

The RDEC scheme offers a tax credit of 12%. This enables companies to claim back up to 10p (after the deduction of Corporation Tax) for every £1 spent on qualifying research and development (R&D) activities. Unlike the scheme for SMEs, this rate remains the same whether you are profit- or loss-making.

The R&D expenditure credit (RDEC) scheme is primarily for large companies. These are businesses with 500 or more employees and either more than €100m turnover or €86m gross assets.

Some SMEs also claim R&D tax credits via RDEC for a portion, or all, of their R&D expenditure. This is because the rules for the SME R&D tax credit scheme include some restrictions for grant-funded projects, for example.

How much is RDEC worth

The R&D tax credit rate for RDEC is worth up to 10p for every £1 spent on qualifying expenditure.

An RDEC claim is paid out in the form of a taxable credit of 12% of your identified qualifying expenditure. As the credit is taxable, it results in a cash benefit of 10% after tax. There is a fixed offset procedure for the credit. It is calculated as a deduction from your tax bill, or if there is no tax payable, the net amount can be claimed as cash.

You can see how this is calculated here:

Benefits to large companies with the RDEC scheme calculations

The new RDEC rate

From 1 January 2018, the government increased the RDEC rate from 11% to 12%. This increase in generosity is good news for large companies – as well as the SMEs who also use the RDEC R&D tax credit scheme. For more information about the history of R&D tax credits, view our timeline.

What the RDEC rate increase means for large companies

This change will increase the value of R&D tax credit claims made by large companies – and the growing number of SMEs using RDEC.

Our team of chartered tax advisers, sector specialists and former HMRC inspectors advise large, complex businesses on the RDEC R&D tax incentive and deal with HMRC on their behalf. We also help grant-funded SMEs claim R&D tax credits using RDEC. As well as managing the claim process for large companies, we also provide a consultancy service. Typically, this is used by larger businesses that are already claiming R&D tax credits and ask us to focus our expertise on a specific aspect of their claim process – for example, record-keeping.

A seat on the HMRC R&D consultative committee means we benefit from policy-level insight. Our constantly evolving process is line with HMRC expectations and results in a maximised claim for our clients. If you need any help preparing either an RDEC claim for a large business or an R&D tax credit claim for an SME, speak to the experts at ForrestBrown.

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This article was last updated on 7 May 2019.

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