Research & Development Expenditure Credit (RDEC) Explained

RDEC is available to all companies that don’t meet the criteria to be an SME. That means all large companies but also includes SME companies that are excluded from claiming under the SME Scheme because they have been subcontracted to by a Large or international company or by an individual or partnership, or because their R&D has been subsidised. Subsidies generally come in the form of significant upfront payments on a fixed price contract, a one off payment to support an R&D project, where there is mutual interest from the company offering the subsidy and also where the company has received a grant that covers some or all of the project.

Depending on the nature of the grant all of the eligible project costs will only be claimable under RDEC. Where the grant is EU State Aid or granted under the General Block Exemption Regulations then regardless of the aid intensity (percentage of costs covered) of the grant, all of the projects costs will be claimed under RDEC.

For other grants, or subsidies, the unfunded amount of R&D Eligible costs can be claimed under the SME scheme.

A company can claim for all of the costs that qualify except payments to corporate entities (subcontractors) as part of their RDEC Claim.

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.