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

The RDEC scheme offers a tax credit of 20%. This enables companies to claim back up to 20p (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 effective (net) benefit will depend on the company’s marginal rate of Corporation Tax but for main rate taxpayers it will increase from 10.53% to 15%. The increase in benefit for small profits rate taxpayers and marginal rate taxpayers will be slightly higher.

An RDEC claim is paid out in the form of a taxable credit of 20% of your identified qualifying expenditure. As the credit is taxable, it results in a cash benefit of 15% 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:

_{*Effective rate – the rate at which a company will benefit from the R&D incentive when taking into account tax savings from R&D enhancements, rates of credit available and tax payable. For example, a company spending £1m on R&D and claiming RDEC, receives a gross credit of £200k. If tax is applied to this credit at 25%, the company will actually receive a benefit of £150k, equating to an effective rate of 15% of its R&D expenditure.}

_{**For accounting periods starting on or after 1 April 2024, the R&D intensive threshold falls from 40% to 30%.}

The new RDEC rate

From 1 April 2023, the government increased the RDEC rate from 11% to 20%. 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.

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 Research & Development Communication Forum means we benefit from policy-level insight. Our constantly evolving process is line with HMRC expectations. 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 us.