Background Note
4.For SME companies additional relief for expenditure on R&D was introduced in 2000. The relief currently gives an additional deduction from profits at a rate of 125% of the qualifying expenditure. This combined with the normal deduction for such expenditure gives a total deduction of 225%
5.The rate of the additional deduction is to be increased from 125% to 130% for expenditure incurred on or after 1 April 2015 once the Treasury make an order.
6.The RDEC was introduced for companies undertaking qualifying activity and incurring qualifying expenditure on 1 April 2013. It was introduced as a standalone credit to be brought into account as a receipt in calculating profits. The current general rate is set as 10% of qualifying R&D expenditure.
7.For profit making companies the credit discharges corporation tax liability that the company would have to pay. Companies with no corporation tax liability will benefit from the RDEC either through a cash payment or a reduction of tax or other duties due. The rate of the R&D expenditure credit is to be increased from 10% to 11% for expenditure incurred on or after 1 April 2015.
