R&D expenditure credit increase

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Larger businesses are now able to claim an increased tax relief on their qualifying research and development (R&D) expenditure.

From 1 January 2018, the rate of the research and development expenditure credit (RDEC) has increased from 11% to 12%.

The RDEC is a standalone and above the line credit that is brought into account as a receipt in calculating profits.

It allows companies to claim an enhanced corporation tax deduction or payable credit on their R&D costs.

Figures released by the Treasury in September 2017 showed qualifying spending on R&D from businesses rose to around £23 billion in the 12 months to 5 April 2016.

Since R&D schemes were launched in 2000/01, more than 170,000 claims were made with around £16.5 billion in tax relief claimed.

The increase to the RDEC was announced in the Autumn Budget 2017, as a part of the Industrial Strategy’s objectives to increase productivity and growth.

In his Autumn Budget 2017 speech, Chancellor Philip Hammond said:

“We are allocating a further £2.3 billion for investment in R&D, and we’ll increase the main R&D tax credit [the RDEC] to 12%, taking the first strides towards the ambition of our Industrial Strategy to drive up R&D investment across the economy to 2.4% of GDP.”