The Large Company Scheme
Why the picture of an elephant you may ask?
Following a number of changes to the SME scheme in recent years, the Large Company Scheme had been left alone. It was fast becoming the elephant in the room during the Government’s yearly Budget.
However, after the 2012 Budget – George Osborne proposed a reboot for large companies, namely with the introduction of the Above The Line (ATL) R&D Tax Credits scheme, taking effect for expenditure incurred from 1 April 2013. This was a significant shift in the way R&D tax will work for large companies and LinkStep saw this as a very positive move.
R&D Expenditure Credits – RDEC
The ATL scheme has since been renamed to the “R&D Expenditure Credit”, also referred to as “RDEC”. Notably, similar to the SME scheme, loss-making companies can now also receive a cash credit for qualifying R&D activities. However, the mechanism moves the delivery away from a tax-based refund or tax credit, and applies a direct discount to the expenditure incurred.
RDEC – A simplified explanation is that the new scheme allows companies to claim an ‘expenditure credit’ for qualifying R&D expenditure incurred. This came into effect for expenditure incurred on or after 1 April 2013.The credit, payable even if in a loss-making position, is still taxable. The credit will also be accounted for as a reduction of R&D expenses in the statutory accounts. The benefit is set at 11% of the qualifying expenditure. However, the 2017 Budget announced an increase of 1% to this rate. Therefore, for expenditure incurred on or after 1st January 2018, the RDEC rate will now be 12%.In-line with both the SME and the old Large Company schemes, claims still need to be made within 2 years of the end of the relevant accounting period.