R&D tax credits > RDEC scheme
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.
The RDEC also enhances the company’s earnings before interest and taxes (EBIT), therefore ends up being more lucrative for larger companies. The scheme is now a straightforward subsidy against the level of R&D spend that your company incurs.
Why choose GovGrant
Our one and only goal is to get you the maximum benefit you deserve for innovating in the UK. When you meet our specialist, it will feel like you’re talking to a colleague rather than your advisor.
We don’t start with your balance sheet. We start by walking the floors and understanding the things you do and the things you make.
There is no conflict of interest. As this is all we do our advice will never conflict with other tax or audit advice you receive.
You are paying for our expertise (not to support a large corporate infrastructure). Experience tells us that when other firms prepare a claim that they leave some of the value off the table. Even the biggest names.
On average, we see an uplift of 200% over what companies have claimed themselves or using another adviser.
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How GovGrant can help you claim under the RDEC scheme
Irrespective of what industry or sector you are, GovGrant can help you identify eligible activities for R&D for tax purposes. GovGrant are always on top of the latest changes in legislation. You can rely on our expertise, leaving you to focus on your main business.
- We will tailor a costing and technical methodology specifically to your business. This will minimise the complexity of the claim process and achieve the maximum benefits. We know from experience that every business is unique.
- We will considerably reduce the demand on your staff by doing all the work on your behalf.
- We will ensure a robust claim is put together minimising any risk.
With a tax credit rate of 13% from 1 April 2020, large companies, and some SMEs, could get more than 10% of their R&D spending refunded through the Research & Development Expenditure Credit (RDEC). You are classed as an RDEC qualifying company if you, and all connected companies, employ more than 500 staff. Even if you and all connected companies employ fewer staff, but you have a turnover of more than €100 million or more than €86 million in gross assets, you qualify for the RDEC scheme.
In addition, if you are an SME you might need to access the RDEC scheme if:
- Your R&D is subsidised
- You have applied for, or are receiving, State Aid for your R&D projects
- You are subcontracted by a larger company
- You are no longer a “Going Concern”
Irrespective of what industry or sector you are, GovGrant can help you identify eligible activities for R&D for tax purposes. R&D takes place when a project seeks to achieve an advance in overall knowledge or capability in a field of science or technology.
You can claim the RDEC tax credit rate of13% against certain costs that are allowable for tax purposes on the project including:
- Employment costs to the company including salaries, bonuses, some reimbursed costs, employers Class 1 National Insurance contributions, employers pension fund contributions
- Subcontractor costs, although there are certain restrictions when you are claiming under the RDEC scheme, ask us to find out more
- Externally Provided Workers (EPWs)
- Software (revenue costs)
- Consumable items including materials and utilities like light and heat
- Clinical trials volunteers in the pharmaceutical industry
We will do the heavy lifting to put your claim together. The technical and financial reports explain how your R&D project:
- Meets HMRC’s definition of qualifying R&D activities and expenditure
- Sought for an advance in science or technology and aimed to achieve this advance
- Had to overcome scientific or technological uncertainty
- Could not easily be worked out by a professional in the field
Ensure your business recognises and receives the full credit it is due with GovGrant’s IP services
The Patent Box is closely linked with R&D tax relief and a company can often claim tax relief under both schemes.
GovGrant can offer you advice to maximise your claims across both schemes. Find out more about our IP services including Patent Box.
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