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

by Anna Walton

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. 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 or an annual turnover of over €100m and a balance sheet figure of over €86m.

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

In its Autumn Budget 2017, the government announced it would increase the RDEC rate from 11% to 12% – effective from 1 January 2018. 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.

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, technical 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.

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This article was last updated on 1 August 2018.

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