Quick answer: RDEC (Research and Development Expenditure Credit) is the UK's above-the-line R&D tax credit for large companies, recognised as taxable income in the profit and loss account. It applied at rates rising from 10% in 2013 to 20% in 2023, and from 1 April 2024 RDEC has been absorbed into the merged scheme, which uses the same 20% mechanism.
What is RDEC?
The Research and Development Expenditure Credit, abbreviated RDEC, was the UK tax relief available to large companies and to SMEs whose projects were ineligible for the SME scheme, such as those receiving notified state aid or subsidised expenditure. It is an above-the-line credit recognised as taxable other operating income in the profit and loss account. The rate rose over time from 10% in 2013 to 13% in 2020 and 20% in 2023. From 1 April 2024, RDEC has been absorbed into the merged scheme, retaining the same 20% above-the-line credit mechanism.
How does HMRC define RDEC?
HMRC guidance on RDEC is at CIRD89700 onwards of the CIRD Manual. The legislation is in Chapter 6A of Part 3 of the Corporation Tax Act 2009. The Seven Steps for the RDEC payable credit, which survive into the merged scheme, are at CIRD89780.
What does RDEC look like in practice?
A large engineering company with £5,000,000 of qualifying R&D expenditure in its year ended 31 March 2024 claims the 20% above-the-line RDEC of £1,000,000. Post corporation tax at 25%, the net benefit is £750,000, equivalent to 15p per £1 of qualifying spend. Use the free eligibility calculator to model this for your own qualifying spend. For periods from 1 April 2024, the same mechanics apply under the merged scheme.
Related terms
Frequently asked questions
RDEC, the Research and Development Expenditure Credit, is an above-the-line credit recognised as taxable other operating income in a company's profit and loss account. It was the R&D relief for large companies until 31 March 2024 and its mechanism now forms the basis of the merged scheme.
The RDEC rate rose from 10% in 2013 to 13% in 2020 and 20% in 2023. From 1 April 2024 the same 20% rate continues under the merged scheme, which absorbed RDEC.
RDEC as a separate scheme ended for accounting periods from 1 April 2024, when it was absorbed into the merged scheme. The merged scheme retains the same above-the-line, 20% credit mechanism that RDEC used.