Research and development expenditure credit (RDEC)

By Tolley
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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 (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

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 (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 Qualifying expenditure for R&D tax relief guidance note.

The RDEC regime is available to companies carrying on a trade and the company must also carry out qualifying R&D activities in line with the existing definition as set out in the Definition of research and development guidance note.

CTA 2009, s 104A(1)

Prior to 1 April 2016, R&D tax relief for large companies was through an enhanced deduction regime with an election to claim RDEC instead from 1 April 2013. For details, see the Large company R&D relief prior to

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