From 1 April 2024, a single R&D scheme applies to SMEs and large companies alike, apart from certain R&D-intensive SMEs.
The new merged scheme is known as the R&D Expenditure Credit (RDEC) scheme and is based on the previous RDEC for large companies.
Like the old-style RDEC, the new scheme provides a headline 20% credit on qualifying expenditure incurred by companies carrying out R&D. Again, this is liable to corporation tax at the company’s applicable rate (19% to 25% dependent on size).
Qualifying costs
- staffing costs
- consumable materials
- software
- externally provided workers that are subject to UK PAYE
- depending on the circumstances, payments to subcontractors carrying out work in the UK
- clinical trials volunteers
- data licences and cloud computing
Loss-making companies
Loss-making companies can claim the RDEC in cash, net of notional corporation tax at 19%. The cash payment is subject to an overall cap of £20,000 plus three times the company’s PAYE and NIC liabilities applies, with an exemption available relating to the creation or management of IP.
Contract R&D and subsidies
Unlike the old SME scheme, SMEs can claim for subsidised projects and, in certain circumstances, work that is carried out whilst performing a customer contract.