Large Companies R&D Expenditure Credit

Large Companies can access a new R & D Programme from 01 April 2013:

The R&D Expenditure Credit

On 1 April 2013 the new R&D Expenditure Credit (“RDEC”) credit will be available on an “opt-in” basis for large companies that undertake qualifying R&D work. RDEC will be mandatory from 01 April 2016 or for companies opting in now. SMEs will continue to claim under the existing “enhanced deduction” SME scheme unless the R&D expenditure incurred only qualifies under the Large Company Scheme.

The main advantage of RDEC is the potential for loss making large companies to claim a refundable cash credit for eligible R&D expenditure incurred. Reporting and accounting for R & D is no longer opaque.

The RDEC is calculated as 10% of eligible R&D expenditure. This credit is applied directly to reduce the company’s corporation tax bill for the year. For companies with no corporation tax liability the RDEC may be refundable in cash. This provides much greater certainty of receipt when compared to the previous “enhanced deduction” scheme where large companies would have to wait until turning a profit to realise the benefit of the claim.

The eligibility requirements for what constitutes R&D for tax purposes and the types of qualifying expenditure will not change. The only change is the mechanism used to reduce the corporate tax bill and the option for loss making large companies to claim an immediate cash benefit.