Understanding the RDEC Scheme: A 2025 Guide

What is the RDEC Scheme?

The Research and Development Expenditure Credit (RDEC) is a UK government tax incentive designed to encourage innovation by allowing companies to claim a taxable credit for qualifying R&D activities. Primarily aimed at large companies, certain SMEs may also be eligible under specific circumstances.

Key Changes Effective April 1, 2024

As of April 1, 2024, the UK government merged the previous SME and RDEC schemes into a single, unified R&D tax relief system. This reform aims to simplify the process and ensure consistency across businesses of all sizes.

Notable Updates:

• Unified Credit Rate: A standard 20% tax credit rate applies to qualifying R&D expenditures for most companies.
• Enhanced Relief for R&D-Intensive SMEs: Loss-making SMEs that spend at least 30% of their total expenditure on R&D activities are eligible for a higher tax credit rate of 27%.
• Restrictions on Overseas R&D: Expenditures on R&D activities conducted outside the UK are generally no longer eligible, with certain exceptions.
• Subcontracted R&D: Companies subcontracting R&D work must now meet specific criteria to claim relief, ensuring the incentive targets genuine innovation.
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Who Can Claim Under the RDEC Scheme?

Large Companies

Defined as businesses with:

• More than 500 employees.
• Annual turnover exceeding €100 million or a balance sheet total over €86 million.

These companies can claim R&D tax credits under the RDEC scheme for qualifying activities.

SMEs Under Specific Conditions

While SMEs typically claim under the SME scheme, certain situations necessitate using the RDEC scheme:

• Receipt of Notified State Aid: If an SME has received government grants or subsidies classified as state aid for their R&D projects.
• Subcontracted R&D Work: If an SME is subcontracted by another company to perform R&D activities.
• Linked or Partner Enterprises: SMEs closely connected to larger companies may exceed SME thresholds when combined, making them eligible for RDEC instead.
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Qualifying Expenditures Under RDEC

To claim R&D tax credits, companies must identify and calculate eligible expenditures:

• Staffing Costs: Salaries, wages, and associated costs for employees directly involved in R&D activities.
• Consumables: Materials and utilities consumed during R&D processes, such as fuel, water, and electricity.
• Software: Costs of software used in R&D activities.
• Subcontracted R&D: Payments to third parties for R&D work, subject to specific eligibility criteria.
• Data and Cloud Computing: Expenses related to data acquisition and cloud services used in R&D.
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How to Claim RDEC Tax Credits

1. Identify Eligible Projects: Determine which of your company's projects meet the criteria for R&D activities.
2. Calculate Qualifying Expenditures: Assess all associated costs that qualify under the RDEC scheme.
3. Prepare Documentation: Compile detailed records of R&D activities and expenditures to support your claim.
4. Submit the Claim: Include the claim in your Company Tax Return (CT600) and submit it to HMRC.

It's advisable to consult with R&D tax specialists to ensure accuracy and compliance, maximizing the potential benefit from your claim.

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Why Choose Claimly for Your R&D Tax Claim?

Many businesses struggle with R&D tax claims due to a lack of expertise, time constraints, or fear of HMRC audits. That’s why working with Claimly makes all the difference.
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✔ Expert Guidance – Our vetted tax specialists have deep expertise in both technical R&D analysis and financial tax compliance.

✔ Maximised Claims – We ensure you claim every eligible expense, increasing your refund or tax savings.

✔ Hassle-Free Process – We handle everything, from identifying qualifying R&D projects to submitting your claim.

✔ HMRC Compliance – We ensure that your claim is fully compliant, reducing audit risk.

✔ Fast & Efficient – We streamline the claim process so you can receive your benefit quickly.

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Calculate your claim here.