WHO CAN CLAIM RDEC?
Research and Development Expenditure Credit (RDEC) is typically claimed by large companies. Other factors such as having received grant funding and carrying out R&D work for a large company can restrict access to the SME scheme.
RDEC is available if you are a large company for R&D purposes with:
- more than 500 staff
- a turnover of more than €100m or a balance sheet total more than €86m
R&D FOR SMEs vs RDEC
The main difference between R&D for SMEs and the Large company scheme (RDEC) is the costs which qualify under the RDEC scheme. Subcontracted expenditure cannot be claimed unless it has been directly undertaken by a scientific research organisation i.e. a charity, university, or an individual.
WHAT DOES THE RDEC SCHEME COVER?
For large companies and SME’s who fall under the RDEC scheme you will be able to claim a tax credit for 12% of your qualifying R&D expenditure from 1st January 2018 and 13% from 1st April 2020.
HOW THE NUMBERS WORK
An RDEC claim is a taxable ‘above-the-line’ credit of 13% of the qualifying expenditure identified. This is subject to corporation tax at 19%, and is calculated as a deduction from your tax bill. If there is no tax payable, the net amount can be claimed as a cash credit.
A company has identified £100,000 of qualifying expenditure incurred on its R&D project.
The net RDEC amount claimable as a credit is calculated as follows.
Above the line credit: £100,000 x 13% = £13,000
Net RDEC amount claimable: £13,000 – (£13,000 x 19%) = £10,530
After tax benefit: £10,530 / £100,000 = 10.53%
