R&D Expenditure Credit (RDEC)

In addition to SME Research and Development tax credits, larger companies (and smaller SMEs that have been subcontracted to by larger companies for R&D work or are in receipt of grants) can now claim Research and Development Expenditure tax credits (RDEC).

Similar qualifying criteria applies to the R&D Expenditure Credit as for the R&D Tax Relief for SME’s, however the R&D Expenditure Credit provides a 13% credit on qualifying R&D expenditure. This credit is normally booked ‘above the line’ in operating profit as earnings (similar to a grant) and improves margins. The credit discharges tax liabilities or loss making companies can access a repayable credit at a net c.10%.

Eligible companies need to be undertaking activities that seek to achieve an overall advance in science or technology and which seek to resolve scientific or technological uncertainty. These developments could include integrating solutions from existing technologies or third party solutions which makes the product go beyond the standard use of off the shelf tools.

RDEC and SME R&D tax credits are both UK Government R&D tax credit incentive schemes. They vary in criteria and eligibility, but both are worth investigating to see how they benefit your company. All too often companies set the barrier too high when assessing eligibility for R&D so it’s worth having a chat to explore if you are entitled.

Wilson Partners’ tax team can guide you through any tax claims that could be beneficial to the growth and development of your business’ IP.

Did you know? R&D tax reliefs are changing from April 2023. Register for our webinar to find out more.