R&D Tax Relief - 2020 Budget Update

Gary Green
Gary Green
March 16, 2020

In our latest 2020 Budget Update, we'll take a look at the new rules around R&D tax relief. This is potentially a great way to reduce your tax burden.

Last week our 2020 budget update took a look at the headline talking points:

  • Increased public spending
  • Emergency coronavirus slush fund
  • Entrepreneur's Relief capped
  • VAT abolished on digital books

Today we'll look at a change to the R&D tax relief rules. If you want to get into the fine detail, check out the HMRC page.

What Is R&D Relief Expenditure Credit (RDEC)?

According to the HMRC wording, RDEC is a:

Tax relief for large companies and some small and medium-sized enterprises that carry out qualifying Research and Development.

It was introduced in April 2013 and was originally set at 10%. After steady increases, the 2020 budget has set the rate at 13% (up 1%). Accounting Web explains that:

The RDEC is an ‘above the line’ taxable credit, so the benefit of the rate is currently 9.72% of qualifying expenditure. With the combination of the corporation tax rate being held at 19% and the RDEC rate rising to 13%, the benefit of this relief will rise to 10.53%.

How Does It Work?

RDEC is primarily for large companies. Smaller companies would typically claim the dedicated SME R&D relief. However, even SMEs can claim RDEC if the activities are either:

  • Subsidised expenditure
  • Expenditure on R&D subcontracted to them by a large company
  • Capped R&D expenditure

If possible, we'd recommend applying for the SME relief as the terms are more generous.

Any Other Business

The chancellor decided not to make a firm decision on reinstating the PAYE/NIC cap for SME relief. This has been rumbling on for eight years now, but small business will have to wait another year before a decision is made.

There is also no decision as yet on whether the cost of acquiring data (for R&D projects) can be considered "eligible expenditure". At the moment, only "software or consumable items" can be offset. In a digital, "big data" world, this definition seems outdated.

If you'd like to discuss how you can use these allowances to reduce your tax liabilities, please get in touch.

Interested in our services?
Fill in your details and a member of our experienced team will be in touch shortly to discuss your needs.
We adhere to strict GDPR rules and do not reveal or sell your data to any third-parties. For more, please read our Privacy Policy.
Latest Insights
May 26, 2021
The Most Common Tax Breaks for Small Businesses in the UK

A significant number of small businesses in the UK do not take full advantage of HMRC-approved...

May 24, 2021
The Complete Small Business Checklist for Hiring Your First Employee

There are a multitude of rules and regulations that you must be aware of when you...

May 21, 2021
Dealing With a Deceased Person's Estate - With or Without a Will

Everything you need to consider when dealing with a deceased person's estate and paying the relevant...

May 19, 2021
All You Need To Know About Workplace Pensions

A workplace pension is a pension scheme offered to employees by employers. Some workplace pensions are...

May 17, 2021
Tax Rates, Thresholds & Allowances for Employers in 2020-21/2021-22

All the tax rates, thresholds and allowances set by HMRC that employers should be aware of...

May 14, 2021
How to Fill Out a PAYE Settlement Agreement (PSA) Form: P626 & PSA1

A PAYE Settlement Agreement (PSA) allows employers to make one annual submission and payment to cover...

May 13, 2021
How Easy Is It to Get Funding as a Startup in the UK?

Financing a new startup business is one of the most crucial aspects of helping a new...

May 12, 2021
Benefit in Kind (BIK) Tax Rates: Calculating Tax on Employee Company Cars

The tax benefits of driving a company car have been steadily reduced over many years. Most...

May 11, 2021
The Essential Guide to Tax Relief Rates on Pension Contributions

You can claim tax relief for your private pension contributions worth up to 100% of your...

View Our latest insights »
Get the latest UK tax & business news and guidance delivered straight to your inbox
We care about the protection of your data. No spam. Unsubscribe anytime.
Copyright © 2021 Key Business Consultants LLP. Reg: E&W OC389322
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram