RDEC (research and development expenditure credit) is a UK government tax incentive designed to support innovative companies investing in research and development (R&D). It is primarily used by large companies and by SMEs in some circumstances, such as if they’re been awarded grant funding.
One of the benefits of RDEC claims is that they can be accounted for above-the-line in your income statement (also known as your profit-and-loss account), providing a positive impact on visible profitability in your accounts. This visibility has a positive impact on R&D investment decisions.
As an SME, you should be interested in investigating if you qualify for RDEC. This requires that:
SMEs often miss out on claiming R&D Tax Credits if they have received a grant, as there is a misconception that they cannot claim. Accepting a grant can restrict access to the R&D Tax Credit scheme, but does not exclude you from RDEC.
Additionally, if you have been subcontracted by a large company you can claim via RDEC for this expenditure. However, if you are working for another SME they will claim for these activities. Before claiming it is important to assess the nature of your subcontracting agreement and who owns the R&D.
There are defined categories of R&D expenditure that can be included within an RDEC R&D Tax Credit claim:
Ensuring that R&D Tax Credits and RDEC is applied correctly means that you will not miss out on potentially significant income. If you would like to discuss how to maximise your R&D activities, get in touch with one of our consultants today.
