Research and development expenditure credit (RDEC)

By Tolley
  • (Updated for Budget 2020)
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The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Research and development expenditure credit (RDEC)
  • RDEC ― large company R&D relief
  • Interaction with SME R&D reliefs
  • Utilisation and payment of RDEC

RDEC ― large company R&D relief

Since 1 April 2016, or from 1 April 2013 by election, large company R&D relief is given through RDEC which is a taxable credit payable to the company. As the credit is taxable, it is also sometimes called an above the line credit. RDEC is calculated by applying a relevant percentage to the company’s qualifying expenditure. The relevant percentage is 12% in relation to qualifying expenditure incurred on or after 1 January 2018 and before 1 April 2020 (11% for qualifying R&D expenditure prior to 1 January 2018 and 10% if incurred prior to 1 April 2015). There is an exception for companies carrying on a ring-fence trade to whom a percentage of 49% applies. 

CTA 2009, ss 104A, 104M

It was announced at Spring Budget 2020 that this credit will increase to 13% with effect from 1 April 2020. See the Tax planning considerations prior to Budget 2020 and the Spring Budget 2020 Summary news items.

Spring Budget 2020 Overview of Tax Legislation and Rates , para 1.17

For changes in rates, qualifying R&D expenditure will need to be separated according to the date it was incurred and the appropriate rates applied. The RDEC is worth up to 9.72% of qualifying R&D expenditure (10.53% after 1 April 2020 and 8.91% prior to 1 January 2018) to a large company subject to the 19% corporation tax rate and applying the 12% relevant percentage from 1 January 2018.

See Example 1.

For the definition of a large company, see the Outline of tax relief for research and development (R&D) expenditure guidance note.

For details of the qualifying conditions and expenditure see the Qual

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