It replaced the previous ‘Large Company Scheme’ in April 2016.
Who is it for?
The RDEC scheme is for ‘large companies’, as defined by HMRC. Your business is classed as a ‘large company’ if you have more than 500 staff and have either more than £86m gross assets, or more than £100m turnover.
Companies that are operating under these thresholds can still claim Tax Credits for their Research and Development work, but they use the separate ‘SME R&D Tax Credit Scheme’. You can use our free R&D guides to find out more about other opportunities for your company.
Making an RDEC claim
The Calculation: Eligible R & D costs + 65% external staff costs = total R and D costs x 11% = expenditure credit total
Your expenditure credit figure goes on your Company Tax Return Form (CT600).
You have up to two years after the end of the accounting period in which the R and D project fell to make an RDEC scheme claim. After this deadline, you forfeit any possible payment.
Using the expenditure credit
Your R & D credit has to be used to settle your Corporation Tax bill (for the relevant accounting period). If your RDEC credit is more than the total cost of R and D employees’ NICs and PAYE, then the difference will be carried forward to the next accounting period. After paying the current accounting period’s Corporation Tax bill, any RDEC credit left over can be used to pay off any other Corporation Tax liabilities you may have or other outstanding bills (like VAT). The final amount can be made as a cash payment to your company. Our R&D tax credits calculator can help you estimate what type of savings you could achieve.
Other factors that affect your RDEC claim
An RDEC claim is very detailed, precise and totally unique to your business. There are other factors that may impact on your RDEC claim, such as where your company and/or the R and D projects take place; in the UK or abroad? Also, if you haven’t paid any NICs or PAYE, it doesn’t stop you making a claim but it does affect how you receive your credit. If you are involved as a subcontractor working on someone else’s R and D project, there are rules which differentiate between SMEs, large companies and ‘other’. It is good to know that you will have a dedicated expert in DSM combing through all of these regulations to produce your complete, accurate and fully optimised RDEC claim.
One piece of entirely good news; subsidies or grants that you may have been awarded do not affect your R and D claim at all.