The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Since 1 April 2016, or from 1 April 2013 by election, large company R&D relief is given through research and development expenditure credits (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 specified percentage to the company’s qualifying expenditure. For expenditure incurred on or after 1 April 2020, the percentage is 13%. The historic RDEC rates are as follows:
12% for expenditure incurred between 1 January 2018 and 31 March 2020
11% for expenditure incurred between 1 April 2015 and 31 December 2017
10% for expenditure incurred between 1 April 2013 and 31 March 2015
There is an exception for companies carrying on a ring-fence trade to whom a percentage of 49% applies.
To accommodate the changes in the rate of the RDEC, qualifying R&D expenditure incurred in accounting periods that straddle a rate change will need to be separated according to the date it was incurred and the appropriate rate applied. The RDEC is worth up to 10.53% of qualifying expenditure between 1 April 2020 and 31 March 2023, (9.72% of qualifying R&D expenditure from 1 January 2018 and 8.91% prior to 1 January 2018) to a large company subject to the 19% corporation tax rate. From 1 April 2023, this will increase to a maximum of 9.75% for a large company subject to the 25% corporation tax rate.
See Example 1.
For the definition of a large company, see the Research and development (R&D) expenditure ― overview guidance note.
For details of the qualifying conditions and expenditure, see the Qualifying expenditure for R&D tax relief guidance note.
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