Research and Development Expenditure Credit is independent of your company’s tax position, and therefore the benefit you’ll receive is easier to forecast. This, in turn will provide greater stability and make it easier for companies to factor the relief when they make investment decisions. Another positive characteristic of the RDEC scheme is that it can be used by loss-making companies as well.
What you need to know about the RDEC Scheme:
- An RDEC tax credit is worth 13% of your qualifying R&D expenditure.
- It is taxable at the normal Corporation Tax rate at 19%
- The benefit can be shown ATL (above the line), which means it is visible as an income in your accounts
- It is offset against your tax liability or, sometimes, can be payable in cash.
The official RDEC rate is currently 13%. Because it’s paid net of Corporation Tax, the effective RDEC rate you’ll receive is 11p for £1 spent. This rate was increased in 2020 from 12% to 13%, which is the third time it increased since the scheme introduction. Certainly great news for organisations using the incentive.
CapEx’ tax specialists can help you calculate the potential value of an RDEC claim for your business. Alternatively, find out more about R&D tax credit claims.
You can claim costs for your R&D project from the first day you start working, until you either finish, pause or discard the project.
Claim the credit is done through entering expenditure into the full Company Tax Return form (CT600). For periods of 12 or more months you’ll need to submit a separate claim for each accounting period.
Supportive evidence might be required with your claim. It will usually be in the form of a summary explaining how your project:
- Meets the Research & Development definition
- Explored advance in science and technology and achieved it
- Overcame uncertainty in terms of science and technology
- Could not be easily worked out by professionals in the field.
CapEx’ tax experts can help your business claim RDEC and save you time and effort with completing documentation. Get in touch with us today.