Posted: 11 / 04 / 2024
The RDEC is a government tax incentive for R&D activities, recognised ‘above the line’ (pre-tax) in company accounts and received either as corporation tax (‘CT’) savings or as a cash credit.
It is calculated by reference to the amount of R&D qualifying expenditure and is set to evolve into the ‘Merged Scheme’ for accounting periods beginning on or after 1 April 2024. For most RDEC claimants the following rates will apply (subject to future changes in tax or credit rates, and the benefit available may be restricted or enhanced in some instances). The uplift for expenditure incurred from 1 April 2023 represents a 43% increase in net benefit, or a 54% increase pre-tax as shown in the company’s accounts!
Where RDEC claimants are on a ‘percentage of tax benefit’ or ‘contingent upon tax benefit’ arrangement with their current R&D tax adviser, this could mean a disproportionate increase in fee and potentially for the same level of work. The ‘additional information’ requirement for claims submitted from 8 August 2023 has increased the number of project descriptions companies may need to prepare and submit to HMRC (a maximum of 10 per claim).
Some R&D tax advisers are capping the support included within their scope and fees (e.g. to 1, 2 or 3 descriptions per claim) and either charging additional fees for descriptions needed beyond this or pushing the additional work onto their client. We recommend evaluating what these changes (amongst other recent changes in the R&D claims landscape) mean for your company’s claims.
If you’d to learn more about how these changes affect you and your claims, get in touch for a free consultation with:
- Josh Perry – Partner, Head of R&D – [email protected] – 07514 585 230 – LinkedIn
- Andy Nixon – Partner, Innovation Tax – [email protected] – 07960 209 500 – LinkedIn
| For expenditure incurred before 1 April 2023 (19% CT rate): | |
| 13% taxable credit | |
| 10.5% net benefit |
↓
A 43% increase in net benefit from 10.5% to 15%
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| For expenditure incurred on or after 1 April 2023 (assuming 25% CT rate): |
| 20% taxable credit |
| 15% net benefit |
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