RDEC scheme FAQs
Who is eligible for the RDEC scheme?
To be eligible under the RDEC scheme, you need to be classified as a large company, which will be subject to corporation tax in the UK. However, the company must also be carrying out eligible R&D activities in the UK, undertaking R&D that is directly related to the trade.
Can SMEs claim under the RDEC scheme?
Yes, Small and medium-sized enterprises can claim under the RDEC scheme if they are ineligible to submit under the SME scheme. For example, an SME that receives grant funding or subsidised state aid can apply under the RDEC scheme.
Can I claim under the RDEC scheme if I am not paying corporation tax?
Yes, your company can claim under the RDEC scheme if you're not paying corporation tax. You may be able to claim the tax credit against another tax liability or a tax liability within a group company. However, if you don't have any taxable profits to offset, the credit will automatically convert into a cash payment.
Is there a deadline for claiming RDEC?
You can make a claim under the RDEC scheme for up to two years after the end of the accounting period in which you incurred the qualifying R&D expenditure. For example, if your accounting period ends on 31 March 2023, you can make a claim for RDEC tax relief on qualifying R&D expenditure incurred between 1 April 2023 and 31 March 2025.
Is there a cap on the amount of RDEC that can be claimed?
The payment of the RDEC cash credit is subject to a cap based on the PAYE and NIC paid to HMRC in the claim period. Remaining cash credits in excess of the cap can be carried forward for use in future periods.
Benefits of claiming under the RDEC scheme?
Submitting a successful RDEC claim can reduce a company’s tax liability, improve cashflow, and boost innovation. The RDEC is accounted for above-the-line in the income statement, which can provide a positive impact on the profitability of your accounts and ultimately increase stakeholder investment in R&D by improving measures such as EBITDA.
Can you claim money spent on subcontractors for an RDEC claim?
Unlike the SME scheme, money spent on subcontractors does not normally qualify for relief under the RDEC scheme. However, this may change in the future, and it’s worth keeping up to date with proposals for a new merged scheme coming in from 1 April 2024.
How do you receive the RDEC credit?
The RDEC scheme is designed so that both loss-making and profit-making companies receive the same RDEC credit. Therefore, the RDEC benefit is subject to corporation tax. The benefit you receive will reduce your corporation tax liability.
Can I claim RDEC if my company is part of a group company?
Yes, in fact, the RDEC scheme offers benefits to companies within a group. As part of the seven RDEC steps, you can elect whether to surrender a proportion of the RDEC credit to other group members to offset against their tax liability, subject to certain conditions and reporting requirements. However, as this is a post-tax adjustment, care is needed when calculating QUIPs payments.
Is the RDEC scheme subject to change or updates?
Yes, government policies and tax regulations have regularly changed when it comes to research and development. It’s important to stay up to date on any legislation changes that may affect the RDEC scheme, and Buzzacott will provide up-to-date information on any upcoming changes to the scheme.
Is there a minimum expenditure threshold for RDEC claims?
There is no minimum expenditure threshold for RDEC claims, but the size and nature of your R&D activities will determine the credit amount.
Can an SME claim both RDEC and SME benefits for the same project?
While an SME can claim under both the RDEC and SME scheme for the same project, the incurred costs cannot be claimed under both schemes. Expenditure must be categorised separately to determine eligibility and choose the most suitable scheme for each specific R&D project.
Do I need professional assistance to claim RDEC?
While you do not need a specialist to claim RDEC tax relief, we find that many claimants are unaware of what projects and expenditure types are eligible, and we also see mistakes in claims. As a result, your claim may be missing expenditure that could rightfully be claimed, or it may include costs that aren’t qualifying, which could mean risking an HMRC enquiry into your claim. Therefore, having your claim reviewed by an independent regulated firm, such as Buzzacott, could be of significant benefit.
How do I calculate RDEC?
We’ve provided a dedicated page for calculating RDEC claims to estimate your RDEC benefit. Our R&D calculator isn't a substitute for professional advice, so get in touch with our R&D experts to receive an accurate estimate.