Research & Development Expenditure Credit (RDEC) Scheme Explained
While the original RDEC scheme ceased to be available for companies to claim for accounting periods beginning on or after 1 April 2024, it is still possible for a business to claim under the original RDEC scheme all the way up to 30th March 2027. You just have to meet these conditions:
Either:
- be a Large Company and not meet the SME Scheme Criteria: Less than 500 employees; and either: Turnover <€100m; or Balance Gross Assets <€86m
- be a Small Company that was subcontracted to by a large company and performed R&D in order to deliver the contract.
And then
- file the claim before the second anniversary of the end of the accounting period up to 30th March 2027; and either
- have notified HMRC of your intention to claim R&D Tax Relief; or
- filed a claim on an original tax return within a 3-year window that ends 6 months after the end of your accounting period; or
- filed a claim on an amended tax return before 31st March 2023, but within a 3-year window that ends 6 months after the end of your accounting period.
If you don’t meet these criteria, please visit our Merged RDEC scheme page.
Use the links below to jump to specific content on this page:
What makes a business qualify? | The difference between the RDEC and SME schemes | How to calculate RDEC | RDEC FAQs
What makes a business qualify for the RDEC scheme?
To qualify for the RDEC tax relief, your businesses needs to be carrying out R&D work. This is defined as carrying out a specific project that looks for an advance in either science or technology.
The government sets out specific rules regarding what qualifies as R&D work, and these include stipulations that the work must find an uncertainty, attempt to overcome that uncertainty, and that this work couldn’t be easily carried out by someone in the field. It is on these projects that you can claim R&D tax relief.
It is also important to note that there are actually two separate R&D tax relief schemes – the RDEC and the SME scheme.
FIND OUT IF YOU'RE ELIGIBLEWhat is the difference between the RDEC and SME schemes?
In simple terms, the SME scheme is for smaller businesses and the RDEC is for larger businesses. In practice, qualifying companies for the RDEC scheme are considered to have more than 500 members of staff, as well as either more than €100m turnover or €86m gross assets.
An important distinction between the two is that unlike in the scheme for SMEs, the 13% rate remains the same, this has increased to 20% from 1st April 2023, whether your business is making a profit or a loss.
It should also be noted that in some cases, SMEs can claim tax relief through the RDEC scheme due to restrictions around some grant-related projects in the SME scheme.
What Is the RDEC Scheme?
The Research and Development Expenditure Credit (RDEC) was a historic R&D tax relief scheme primarily designed for larger companies carrying out qualifying research and development activities.
Unlike the SME scheme, RDEC provided a taxable expenditure credit that was recognised as income in the company’s accounts. This “above-the-line” treatment made the benefit more visible within financial reporting and helped businesses understand the value of their R&D investment.
Under the historic rules, certain SMEs could also fall under RDEC where specific circumstances applied, such as receiving certain types of funding or carrying out qualifying subcontracted R&D.
Does RDEC Still Apply?
| Accounting period | Applicable regime |
|---|---|
| Beginning before 1 April 2024 | Original RDEC may apply, depending on the company’s circumstances. |
| Beginning on or after 1 April 2024 | The merged R&D Expenditure Credit scheme generally applies. |
| Loss-making SMEs that are R&D-intensive and meet the conditions | Enhanced R&D Intensive Support (ERIS) may apply. |
The original RDEC scheme has been replaced for most new accounting periods.
What R&D Costs Could Be Claimed Under RDEC?
Under the historic RDEC rules, qualifying expenditure could include costs directly related to eligible R&D activities.
| Cost | Potentially qualifying? |
|---|---|
| Employee costs | ✓ Potentially |
| Consumables | ✓ Potentially |
| Software used for R&D activities | ✓ Potentially |
| Externally provided workers | ✓ Subject to specific rules |
| Subcontracted R&D | Subject to historic RDEC rules and circumstances |
| Certain other qualifying costs | ✓ Potentially |
RDEC vs SME R&D Tax Relief vs the Merged Scheme
| Historic SME R&D Relief | Historic RDEC | Merged R&D Scheme | |
|---|---|---|---|
| Applicable period | Before April 2024 | Before April 2024 | From April 2024 |
| Main users | Eligible SMEs | Mainly larger companies | Most companies undertaking qualifying R&D |
| Benefit structure | Enhanced deduction / payable credit for eligible losses | Taxable expenditure credit | Expenditure credit |
| Above-the-line credit | No | Yes | Yes |
| Current scheme? | Historic only | Historic only | Yes |
How Do You Make an R&D Tax Claim?
- Identify qualifying R&D projects
Determine which projects sought an advance in science or technology and involved genuine scientific or technological uncertainty.
- Identify qualifying expenditure
Map eligible costs directly connected to those R&D projects.
- Prepare technical and financial information
Explain:
- the advance being sought;
- the uncertainties encountered;
- the work undertaken to resolve them;
- how qualifying expenditure was calculated.
- Submit the claim
Companies making R&D claims may need to submit an Additional Information Form (AIF) alongside their Corporation Tax Return, alongside any other applicable claim requirements.
Cooden's R&D Tax Expertise
At Cooden R&D, we help businesses identify qualifying R&D activities, prepare robust claims and understand the changing R&D tax landscape.
Our experience includes:
- Assessing technical R&D activities across multiple industries
- Preparing technical narratives and financial calculations
- Supporting businesses through the claim process
- Helping clients understand HMRC requirements
- Providing guidance where claims require additional technical support
Our specialists work with businesses to ensure their R&D activities are clearly identified, accurately documented and supported with appropriate evidence.
Find out whether your business could benefit from R&D tax relief by speaking with Cooden’s R&D tax specialists today.
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Book a FREE 15 Minute Call
We’ve found that an initial 15-minute phone call is normally sufficient for us to determine whether there is some potential in a project. Choose a date and time to schedule in your free, no obligation call with our experts.
BOOK A FREE CONSULTATIONHow to calculate RDEC
In theory calculation your RDEC tax relief is simple – but some of the most complex aspects of the process are in understanding exactly what you can claim for, and ensuring that you are maximising the potential of your claim.
To calculate your qualifying expenditure:
- Establish the costs that you can directly attributable to R&D (see above
- Reduce to 65% of the original cost of subcontractor or external staff
- provider payments where relevant
- Add your costs together
- Multiply the figure by 13% to get the expenditure credit
- Put this figure into your tax return
If your relevant R&D spending is £100,000, you will receive an estimated tax refund of £10,530. This figure comes from 13% of the £100,000 (£13,000) minus the 19% corporation tax rate.
Contact UsContact Us Today
If you would like to learn more about the RDEC R&D tax relief scheme, the team at Cooden would be happy to help. We have extensive experience helping businesses get as much out of their tax relief claims as possible – we can do the same for you. You can call us on 01424 225345 or email us at info@coodentaxconsulting.co.uk for more information.
RDEC FAQs
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What is the RDEC tax credit?
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Does RDEC still apply?
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What costs can qualify under RDEC?
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What is the difference between RDEC and the SME R&D tax relief scheme?
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How do I make an RDEC tax claim?
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