R&DResearch expenditure credit for large companies and smallDevelopment and(R&D) medium-sizedexpenditure enterprisescredit

What R&D expenditure credit is(RDEC)

TheExpenditure R&Dcredit expenditureis credita (RDEC)tax schemecredit and can be usedclaimed byif someyou’re companies,either witha:

• large accountingcompany
• small periodsand beginningmedium-sized beforeenterprise 1(SME) Apriland 2024,you tocannot claim aR&D tax creditrelief for reliefsmall onand R&Dmedium-sized costs.
  enterprises

ItWhether canyour company makes a profit or loss, some or all of the expenditure credit may be used to pay: 

• settle your company’scompany’s, or other group companies’ Corporation Tax Tax liabilities.

  In some circumstances the expenditure credit can:

  • be used to settle other tax liabilities suchyour ascompany VAT 

    is liable for
  • lead to a payment of credit to your company

  If

  Expenditure there’scredit anyrates

  The expenditure credit leftis overcalculated afteras payinga percentage of your taxqualifying liabilities,R&D itexpenditure, maythe berates paidare:

  • 11% on expenditure incurred from 1 April 2015 up to yourand company. 

    Ifincluding your31 taxDecember credit2017

  • 12% ison lowerexpenditure thanincurred thefrom total1 spentJanuary 2018 up to and including 31 March 2020
  • 13% on PAYEexpenditure incurred from 1 April 2020 up to and Nationalincluding Insurance31 contributionsMarch 2023
  • 20% on expenditure incurred from 1 April 2023

  Check what expenditure qualifies for expenditure credit

  Before you make a claim for expenditure credit, check that the excesscosts:

  • are ispart carriedof forwarda specific project to futuremake accountingan periodsadvance asin science or technology, it cannot be an advance in the arts, humanities or social sciences, including economics
  • meet the standard definition of R&D
  • qualify for expenditure credit.
    credit, listed in the section ‘Which expenditure qualifies for expenditure credit’

  Which expenditure qualifies for expenditure credit

  IfYou yourcan accountingclaim periodthe beganexpenditure credit on some of the costs you incur from the start to the end of the R&D project.

  R&D starts when work begins to resolve the scientific or aftertechnological 1uncertainty Apriland 2024,ends when that uncertainty is resolved, or the work to resolve it stops.

  The following information will tell you mustwhich costs you can and cannot claim underfor.

  You the can also find further guidance in CIRD82000 of the Corporate Intangibles Research and Development merged schemeManual.

  Who

  Consumable items

  You can claim for the relevant proportion of consumable items used up in the R&D, this includes:

  • fuel
  • materials
  • power
  • water

  You shouldcannot useclaim the RDECcosts if you sell or transfer ownership of the consumable items used up in the R&D.

  Clinical schemetrials ifvolunteers

  For yourR&D accountingprojects periodin beganthe beforepharmaceutical 1industry, Aprilyou 2024can andclaim for payments made to the subjects of clinical trials.

  Contributions for independent R&D

  You can claim for contributions made for independent R&D, as long as you’re a: a large company.

  The person receiving the contribution must be:

  • largea company qualifying body
  • smallan andindividual
  • a medium-sizedfirm enterprisewhose andmembers you’reare claimingall individuals

  They cannot be connected to your company.

  The contributions made by you for workthe thatindependent hasR&D beenmust:

  • be subcontractedrelevant to you your trade
  • smallnot be sub-contracted by your company

  You cannot claim any contributions if you’re a SME.

  Data licence and medium-sizedcloud enterprisecomputing

  For accounting periods beginning on or after 1 April 2023, qualifying expenditure is extended to include the relevant elements of data licence costs and you’vecloud receivedcomputing costs.

  A data licence is a notifiedlicence Stateto Aidaccess forand theuse project a collection of digital data.

  Cloud computing includes:

  • data storage
  • smallhardware andfacilities
  • operating medium-sizedsystems
  • software enterpriseplatforms

  You andcan you’reclaim claiming for most data and cloud computing costs thatspent haveon beenR&D.

  Externally subsidisedprovided inworker somecosts

  Workers othersupplied way,by a staff provider such as an employment agency, are classed as externally provided workers.

  You can:

  • claim 100% of the relevant payments, if your company and the staff provider are connected
  • claim 65% of the relevant payments made to a grantstaff provider, which is not connected to your company, if they supply externally provided workers for the project

  Staff costs

  IfFor youstaff doworking notdirectly meeton thesethe conditionsR&D project, you maycan beclaim ablefor the following costs, as long as they relate to claimR&D:

  • bonuses
  • salaries
  • wages
  • pension usingfund thecontributions
  • secondary smallClass and1 medium-sizedNational enterpriseInsurance taxcontributions reliefpaid scheme.
    by the company

  ToIn specific circumstances you may also claim yourfor companyan must element of administrative or support staff who work to directly support a project, for example:

  • behuman trading  resources used to recruit a specific person to work on the project
  • bespecialist chargeablecleaning tostaff

  These Corporationare Tax  known as qualifying indirect activities.

  The following are some examples of staff costs that you cannot claim for:

  • redundancy payments
  • staff costs for clerical or maintenance work that would have been done anyway, like managing payroll

  Software

  You can claim for software licence fees for R&D and a projectreasonable thatshare meetsof the definitioncosts offor software partly used in your R&D  activities.

  Subcontractor costs

  Subcontracted expenditure cannot be claimed unless it’s directly undertaken by:

  • a qualifying body, for example a charity, higher education institute, scientific research organisation or health service body
  • havean individual
  • a firm where each member is an individual

  Examples of costs that do not qualify

  The forfollowing are other examples of costs that you cannot claim for:

  • the relief production and distribution of goods and services
  • capital expenditure
  • the cost of land
  • the cost of patents and trademarks
  • rent or rates

  ExpenditureCalculate creditthe ratesexpenditure credit

  TheFollow taxthese creditsteps isto workedcalculate the expenditure credit.

  1. Work out asthe acosts percentagethat are directly attributable to R&D.

  2. Reduce any relevant subcontractor or external staff provider payments to 65% of yourthe qualifyingoriginal R&Dcost.

  3. Add costs.all Thecosts together.

  4. Multiply the figure by the expenditure credit rate onto costsget from:  the expenditure credit.

  Before you claim

  You must follow these steps before you claim the expenditure credit, or your claim may not be valid.

  1. For accounting periods beginning on or after 1 April 20152023, upcheck if you need to andsubmit includinga 31claim Decembernotification 2017form isto 11%  notify HMRC in advance of your claim. Find out what you need to provide when you tell HMRC that you’re planning to claim R&D tax relief.

  2. 1From January8 2018August up2023 you must submit an additional information form to support your claim. Find out how to send the information and includingwhat 31to Marchprovide 2020when isyou 12%  submit detailed information before you claim R&D tax relief.

  How to claim

  Claim using the Company Tax Return and:

  • 1show Aprilthe 2020expenditure upcredit toas taxable income in your profit and includingloss 31account, Marchor 2023by isadding 13%  

    it to your profit in the single iXBRL computations file
  • put an ‘X’ in box 656 to tell us that you’ve submitted the claim notification form

  • 1put Aprilan 2023‘X’ upin box 657 to andtell includingus 31that Marchyou’ve 2024submitted isthe 20%

    additional information form
  • include your bank details so that HMRC can make the payment

  What

  Complete the supplementary form CT600L.

  Guidance is available to help you needcomplete your Company Tax Return.

  If your tax relief claim covers more than 12 months, submit a separate claim for each accounting period.

  You can make a claim for tax relief up to do2 next years after the end of the accounting period it relates to.

  Check the ‘Before you claim’ section to make sure that your tax relief claim will be valid.

  How to use the expenditure credit

  You must follow these steps to use the expenditure credit before the final amount is paid to your company.

  Step 1

  Use the credit to settle your Corporation Tax liability for the accounting period. If the credit means you’re due a smallrepayment andfor medium-sizedCorporation enterpriseTax andthat arehas eligiblealready been paid, the interest will be calculated on a last in, first out basis.

  If there is any expenditure credit left after settling your Corporation Tax liability go to claimstep RDEC,2.

  If there is no expenditure credit left, you do not need to follow step 2 to step 7.

  Step 2

  Compare the amount of expenditure credit brought forward from step 1 with the net amount of expenditure credit you’ve claimed. The lower of the 2 figures is carried down to step 3.

  If the expenditure credit brought forward exceeds the net amount, the excess may be ableeither surrendered to applyanother forgroup advancecompany assuranceto meet a Corporation Tax liability which it owes to confirmHMRC, ifor carried forward to discharge the company’s Corporation Tax liability in future periods.

  The net amount of expenditure credit is the figure you’ve claimed minus Corporation Tax at the main rate.

  Step 3

  Compare the expenditure credit brought forward from step 2 with your claimcompany’s willtotal beexpenditure accepted.on R&D workers’ PAYE and National Insurance contributions. The lower of the 2 figures is carried down to step 4.

  AllIf companiesthe expenditure credit brought forward exceeds the total spent on R&D workers PAYE and enterprisesNational Insurance contributions, the excess amount is carried forward to future periods.

  Step 4

  You must checkuse ifthe youremaining needamount to tellpay HMRCany outstanding Corporation Tax liabilities for any accounting periods.

  Step 5

  You can surrender the credit wholly or partly to any group member. The amount surrendered can only be used to discharge a Corporation Tax liability of that you’regroup planningmember.

  Step 6

  You must use the expenditure credit to claimdischarge thisany relief.other company liabilities, like VAT or liabilities under a contract settlement.