The Research and Development Expenditure Credit (RDEC) was introduced by the Finance Act 2013.  This legislation led to a change in how large companies and SME’s with funded projects claim R&D tax relief.

Previously the large company R&D regime only brought benefit to companies making a profit.  RDEC has been structured to  appear ‘above the line’.  This means it is identified in the company’s accounts and can now enable a credit to be recognised.  RDEC enables both loss making and profitable companies to equally benefit from the credit available.

The Mechanics

The RDEC calculation has several steps, the table below outlines an overview of the mechanics for the CT computation.

Assuming £100,000 of R&D expenditureNo Claim £RDEC Claim £
R&D Expenditure(100,000)(100,000)
Other Expenditure(500,000)(500,000)
Profit/(Loss) Before Tax400,000400,000
Tax Charge @19%76,00076,000
RDEC @12%12,000
Profit/(Loss) Before Tax412,000
Tax Charge @19%78,280
RDEC Credit(12,000)
CT Payable66,280
Net Saved9,720
Net Benefit %9.72%

For taxpaying companies, the RDEC benefit reduces the company’s corporation tax liability.  For loss making companies RDEC creates a credit payable immediately.

The cash RDEC credit value is subject to several steps, one criteria being it is capped based on the PAYE and NI paid to HMRC for staff members included in the RDEC calculation.

Live R&D Tax Webinars
Is my business eligible for R&D tax relief?
Learn More
How much can I save with R&D tax relief?
Calculate Now
Case Studies Library
See Case Studies

Latest News and Insights

See All News and Events

Become a Partner

Working with R&D Tax Solutions enables your service offering to be extended without jeopardising client service or quality. We are the trusted tax partner for a variety of businesses. Our team enables the partnerships to flourish with clear transparency of services provided and benefits obtained. Whether you are a boutique consultancy with a select few clients, or an accounting practice with a wide variety of clients our team will give you the peace of mind that your clients interests are our priority.

Find Out More

Any questions? Talk to our Tax Specialists

0161 298 1010