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 In a digital, "big data" world, this definition seems outdated.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
March 4, 2022
An Overview of EIS (Enterprise Investment Scheme) - All You Need to Know

There are several benefits for the EIS, or Enterprise Investment Scheme, to make this an interesting...

March 3, 2022
Tax Relief for Angel Investors: Gary Green's Webinar for Stakeholderz

Key Business Consultants' principal Gary Green spoke with Stakeholderz discussing the SEIS & EIS scheme and...

February 23, 2022
What Are EMI Share Schemes? All You Need to Know

If you are considering awarding shares to your employees, an Enterprise Management Incentive is often the...

January 31, 2022
Payments on Leaving Employment: How to Reduce Your Tax Liability

Normally the process for leaving employment is quick and straightforward but this is not always the...

January 17, 2022
HMRC Investigations: What You Need to Know

Discovering that you are being investigated by HMRC can be very stressful, even if you are...

January 14, 2022
Business Transactions - Guide to Planning and Executing Efficiently

There are some transactions in business that are significant and require substantial forward-planning to be a...

January 12, 2022
Why Employee Equity is an Important Issue For Every Business

Being a business leader is about being willing to embrace innovation and be flexible about how...

January 10, 2022
An Employer’s Guide to Settlement Agreements

If you need to terminate the contract of an employee, a properly drafted settlement agreement can...

January 7, 2022
Taxation of Private Company Shares - What Should You Know?

Many companies opt to reward their employees with shares or options because of the manifold benefits...

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 © 2022 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