What is the RDEC scheme?

The Research and Development Expenditure Credit (RDEC) scheme was introduced for large companies on 1 April 2013. From the 1 January 2018 the RDEC rate was 12%. This was increased to a rate of 13% from 1 April 2020.

It is given as a taxable credit on the amount of qualifying R&D expenditure payable as cash or as an offset against the company’s corporation tax liabilities. Therefore this rate applies whether your company is making a profit or a loss. A company can claim RDEC going back two full financial years.

How can you benefit from the RDEC rate?

You are classed as a large company for the purposes of R&D tax incentives if you employ more than 500 staff or you have a turnover of more than €100 million and more than €86 million in gross assets. The R&D tax credit rate for RDEC means that large companies could get over 10% of their R&D spending refunded.

For tax purposes R&D does not necessarily mean blue-sky research which is a common misconception that can prevent companies from receiving the benefits from HMRC that they are entitled to. RDEC allows the benefit of R&D to be accounted for within the Profit and Loss (P&L) account, above profit before tax, rather than only through the tax account. So, under the RDEC scheme, large companies who are loss making are now able to benefit from their development efforts for the first time, by way of an immediate net of tax cash credit.