RDEC (Research & Development Expenditure Credit)

The Research & Development Expenditure Credit (RDEC) is a UK government incentive because it encourages large companies and certain SMEs to invest in innovation. The scheme provides a taxable credit since the government wants to offset the cost of undertaking qualifying research and development.

RDEC applies differently from the SME R&D Scheme so that businesses with certain funding conditions can still benefit from tax relief.

Who Qualifies for RDEC?

Large companies qualify for RDEC because they exceed the SME thresholds of 500 staff and either €100 million turnover or €86 million balance sheet total. SMEs also qualify for RDEC when they receive notified state aid, which means their R&D activities are not eligible for the SME relief rates.

Businesses undertaking publicly funded projects use RDEC since grant funding changes how HMRC calculates their claim entitlement. Companies must perform qualifying R&D so that their work meets HMRC’s definition of advancing science or technology.

How the RDEC Scheme Works

RDEC operates as a taxable benefit because HMRC applies the credit against the company’s corporation tax liability. The credit is calculated as a percentage of qualifying R&D expenditure so that businesses receive a proportional return on investment.

Loss-making companies can receive the credit as a cash payment, which means even non-profitable research generates financial benefit. The benefit is shown “above the line” in company accounts so that it is visible as income in financial reporting.

Qualifying Activities

Projects qualify under RDEC when they seek to achieve an advance in science or technology because HMRC only rewards work that goes beyond routine development. The R&D must address technological uncertainty since projects with clear, known solutions are excluded.

Examples of qualifying activities for large companies include:

• Developing advanced aerospace engineering systems so that aircraft efficiency improves.
• Conducting pharmaceutical trials because new compounds must be proven safe and effective.
• Creating high-precision manufacturing techniques since existing processes cannot achieve the required tolerances.

The Claim Process

1. We start with an eligibility check because correct scheme selection prevents costly errors.
2. We gather technical and financial evidence since HMRC requires documentation to verify claims.
3. We prepare a technical narrative so that HMRC can clearly understand the project’s objectives, challenges, and results.
4. We submit the claim through the company’s corporation tax return, which means the credit is processed as part of the standard annual filing.

Common Mistakes in RDEC Claims

Misclassifying non-R&D costs as eligible leads to HMRC enquiries because it undermines claim accuracy. Providing incomplete technical evidence delays approval since HMRC cannot validate the project’s qualification. Failing to recognise the impact of grant funding results in using the wrong scheme, which means the claim may be rejected.

Benefits of Using a Specialist

• We maximise claim values because we identify every qualifying cost within HMRC’s rules.
• We reduce the risk of HMRC enquiry since our claims meet both the technical and financial requirements.
• We save internal resources so that your team can focus on delivering innovation rather than processing claims.
• We work on a no-win-no-fee basis, which means our success depends entirely on your claim’s success

Deadlines

RDEC claims must be submitted within two years of the end of the relevant accounting period because HMRC enforces statutory time limits. Missing this deadline permanently removes the right to claim, which means the credit is lost without recovery options.

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Your business can reclaim significant R&D costs because RDEC rewards qualifying innovation. You risk losing this benefit if you delay since the deadline is fixed and non-negotiable.