Welcome changes for those companies claiming the Research and Development Expenditure Credit (‘RDEC’)
23rd November 2017
RDEC is available for Large Companies undertaking qualifying R&D activity or for small and medium sized companies undertaking either subsidised R&D or undertaking qualifying R&D activity on behalf of a large company.
Yesterday Philip Hammond announced that there would be an increase in the RDEC from 11% to 12%. Whilst it seems a small change this can have a significant impact upon those companies who are eligible to make the claim, whether they are already making claims or are yet to explore the opportunity to do so. The 1 % point increase actually equates to a 9% increase in the benefit!
RDEC works very similar to the previous Large Company R&D scheme in that qualifying expenditure is first quantified. However, rather than providing an enhancement of 30% (as under the previous large company scheme), the quantified expenditure attracts an 11% (12% from 1 January 2018), payable above the line credit. This credit is brought into account as a receipt in calculating profits.
Many SME’s were disappointed that there were no changes to the current scheme for enhanced deductions which currently allow up to a 230% deduction for qualifying costs on the basis that the smaller businesses need more help than the larger ones who will benefit from the RDEC changes.
That said, this change further emphasises the governments clear commitment to support and encourage scientific and technological innovation in the UK can only be a positive step to ensure the growth of the economy going forward.