Are you ready to claim your R&D under RDEC ‘for all’?

The R&D tax credit and tax relief landscape continues to evolve at a rapid pace, bringing with is a great deal of complexity, at least in the interim transition periods.

How much is RDEC worth?

The modified RDEC (Research and Development Expenditure Credit) scheme is applicable to all R&D claimants, for accounting periods starting on or after 1^st April 2024, except R&D intensive SMEs. The level of benefit under RDEC is 15p for every £1 of qualifying R&D expenditure, so R&D expenditure of £100K will give a tax credit of £15K to the claimant company. This can be used to offset corporation tax, or in some circumstances received as a cash payment.

R&D intensive SMEs

For R&D intensive SMEs the level of benefit from an R&D claim continues to be worked out under the SME calculation method with the maximum level of benefit being 26.97% of qualifying R&D expenditure. To be considered R&D intensive, a company must have qualifying R&D expenditure of at least 40% of its total expenditure in the relevant accounting period (or 30% for accounting periods beginning on or after 1 April 2024). All other changes to the rules under the modified RDEC scheme will apply equally to R&D intensive SMEs.

Changes to the rules under RDEC

The most complex and in some cases most impactful changes under the modified RDEC scheme (applicable for all accounting years starting on or after 1^st April 2024) are in regard to:

1. New rules for contracted-out R&D.
2. Restrictions on claiming for payments to overseas based contractors and/or workers.

Following a consultation process which is now closed, the new guidance on both of the above is still in draft form and can be found here: https://www.gov.uk/government/consultations/draft-guidance-research-and-development-rd-tax-reliefs-new-contracting-out-rules-and-overseas-restrictions/research-and-development-tax-reliefs-new-contracting-out-rules-and-overseas-restrictions-draft-guidance.

If you have any queries on any of the changes or would like to find out more about our support services get in touch.

Linda Eziquiel -Regional Director RandDTax