The Chancellor announced a measure to amend the Research and Development Expenditure Credit (RDEC) legislation so that universities and charities are unable to claim RDEC.  It was never the original intention to allow universities or charities to qualify for RDEC and having received approximately 50 claims from universities and charities HMRC have acted quickly to close the loophole.

Legislation will be introduced in the Summer Finance Bill 2015 to amend the qualifying criteria for RDEC in Section 104A CTA 2009 so that an institution of higher education or a charity will be an ‘ineligible company’ and as such unable to claim RDEC in respect of expenditure incurred on or after 1 August 2015.  This measure therefore does not impact any claims made to date and as it only has effect in relation to expenditure incurred on or after 1 August 2015 there is still an opportunity to submit RDEC claims for expenditure up to that point.   This amendment relates to the university’s or charity’s own independent research and also for the R&D they carry out as subcontractors.  However, it does not impact ‘spin out’ companies used by universities or charities to commercialise their research.

Alex Price, Director commented:

“It is no great surprise really that HMRC have acted quickly to close this loophole as these institutions were unable to claim under the previous large company scheme and it keeps the RDEC scheme focussed on benefiting private sector businesses investing in R&D.  The Chancellor’s announcement that the corporation tax rate will reduce from 20% to 19% from 2017, with a further reduction to 18% to follow in 2020, is positive news for businesses claiming RDEC as it will further increase the scheme’s benefits and hopefully act as a further incentive for businesses to invest in R&D.”