Introduced in 2013, the R&D Expenditure Credit (RDEC) is the main incentive for attracting and supporting R&D investment in the United Kingdom, and is designed to make the UK a leader in driving innovation.
The tax incentive allows for a net tax credit of eligible R&D expenditure up to 9.72%, which directly reduces corporate tax liability.
If the company is loss-making, it can ask for a full refund of the credit generated.
Who can benefit from the R&D Expenditure Credit incentive?
Large companies are defined as any company that meets at least one of the following conditions:
–It has more than 500 employees
– Annual turnover > €100 million AND total balance sheet > €86 million
All entities within a group are included when calculating the thresholds.
The RDEC is available to any incorporated company conducting innovation, regardless of its sector of activity.
Creation or improvement of a product, procedure, process, program or equipment, demonstrating originality or substantial improvement
Claims are made through a self-assessment method in the corporate tax return. Technical and financial documentation to support the claim is necessary in the event of enquiries from HMRC.
– Operating costs (software and consumables)
– Activities subcontracted to qualified entities
An 12% taxable credit is calculated from eligible expenses.
Applying the corporate tax rate in force (19%) gives a net benefit of 9.72% of R&D expenditure.