Research and development expenditure credit (RDEC)

Produced by Tolley

The following Corporation Tax guidance note Produced 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
  • Restrictions
  • Ineligible companies
  • Amounts deducted by way of tax adjustment
  • Surrender of credit to other group companies

Research and development expenditure credit (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 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:

  1. 12% for expenditure incurred between 1 January 2018 and 31 March 2020

  2. 11% for expenditure incurred between 1 April 2015 and 31 December 2017

  3. 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 e

Popular documents