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RDEC Scheme explained

RDEC Scheme explained

When it comes to research and tax credits, you may have come across the term RDEC. To understand what this means and what the scheme provides, we have put together some handy information to help.

What does RDEC stand for?

RDEC Stands for Research and Development Expenditure Credit.

What is RDEC?

RDEC is one of two UK government tax incentives which is designed to reward innovative companies for investing their time and resource into research and development. An RDEC claim is a straight percentage of the qualifying cost treated as income, but also involves offsets and caps. Depending on if your company is profitable or loss-making the credit may be used to discharge the liability or result in a cash payment.

Who can use the RDEC scheme?

RDEC is offered to companies that exceed the limits of the SME R&D relief scheme. It is a government scheme primarily used by large companies however there are some circumstances where SMEs may use this scheme. The scheme is for large UK companies that are subject to UK Corporation Tax, carry out qualifying R&D, and spend money on those activities.

How much can I expect to get back?

RDEC claimants receive up to 12% of their R&D spend back

What costs can I claim?

You can claim costs from the beginning date of the project until you develop or discover an advance or until the project has stopped.

Additional aspects you can claim on are:

  • Staff costs – This includes salaries, wages, Class 1 national insurance contributions and pension fund contributions
  • Subcontractor costs – this can only be done if it has been undertaken by a charity, higher education institute, scientific research organisation, health service body, an individual or partnership of individuals
  • Consumable items – such as materials and utilities

What costs CAN’T I claim from?

  • The production and distribution of goods and services
  • Capital expenditure
  • The cost of land
  • The cost of patents and trademarks
  • Rent or rates

How to calculate RDEC

To do this, you will need to do the following:

  • Work out which costs are directly attributable to R&D
  • Reduce any relevant subcontractor or external staff provider payments to 65% of the original cost
  • Add together all the costs
  • Multiply the figure by 12% to get the expenditure credit
  • Enter this figure into your tax return

How to claim RDEC

If you’re looking for advice with how to put in your claim for RDEC, RDT Active can help. We have built up a team of specialist consultants with real expertise in numerous areas of technology and are able to structure and present applications for RDEC R&D Tax Relief to maximise your benefit. We can help give you the confidence that your application/claim is well-founded and fully defensible.

We believe our consultants are the best in the business and our service is second to none. Get in contact with one of our incredible team members now by calling 0115 855 0960 or get in touch with us through our contact page.

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