What is the Research & Development Expenditure (RDEC) scheme and how can you claim?
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Summary: The old RDEC scheme applied to eligible companies with qualifying R&D in accounting periods beginning before 1 April 2024. This guide explains its rates, eligible costs, payment steps and the checks needed for a historic claim.
The old RDEC scheme: rates, eligibility and how to claim
The old Research and Development Expenditure Credit (RDEC) scheme could apply to qualifying R&D in accounting periods that began before 1 April 2024. The start of the accounting period determines which scheme applies, even if some of the R&D expenditure came later.
For accounting periods beginning on or after 1 April 2024, the old RDEC scheme was replaced by the merged R&D scheme. Eligible loss-making R&D-intensive SMEs may instead claim enhanced R&D intensive support (ERIS). This guide covers the old scheme and claims relating to earlier accounting periods.
What was the old RDEC scheme?
RDEC was a taxable credit calculated as a percentage of a company’s qualifying R&D expenditure. It was primarily used by large companies, although some SMEs could also claim under it. The company included the credit as taxable income, and it could reduce its Corporation Tax liability. Depending on the company’s circumstances and the payment steps, some of the remaining credit could be paid to the company.
This distinction matters when comparing RDEC rates. A 20% RDEC rate means a gross credit of 20% of qualifying expenditure, not a 20% net cash benefit. The amount ultimately received or used against tax depended on the company’s tax position and the rules for using the credit.
HMRC now uses the term merged RDEC scheme for the replacement relief. The old and merged schemes share a credit-based approach, but their contracting, cost and payment rules are not identical. Check the accounting-period start date before using guidance for either scheme.
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Who could claim under the old RDEC scheme?
A company needed to be trading, within the charge to UK Corporation Tax, undertaking qualifying R&D and incurring costs that met the relevant rules.
Large companies generally used old RDEC for qualifying expenditure in accounting periods beginning before 1 April 2024.
Some SMEs could also use old RDEC where expenditure did not qualify for the former SME relief but met the RDEC conditions. Examples include certain projects involving notified State aid, subsidised expenditure or R&D contracted to an SME by a large company or a person outside UK Corporation Tax. The treatment depends on the funding and contractual arrangements; receiving a grant or undertaking work for a customer did not automatically make every cost eligible for RDEC. A company could not claim both the old SME relief and RDEC on the same expenditure.
If an SME was carrying out its own qualifying R&D without one of the relevant exclusions, the former SME scheme may instead have applied. HMRC’s old RDEC guidance sets out the historic routes.
What work counted as R&D?
The project had to seek an advance in a field of science or technology and address scientific or technological uncertainty that a competent professional could not readily resolve. The advance must relate to the wider field, not simply to what was new to the business.
For example, building a new product or improving a process did not qualify by itself. The claim needed to identify the underlying technical challenge, explain why established knowledge or methods were insufficient, and show how the team tried to resolve it. A project could still qualify if the attempt failed, provided the work met the R&D definition.
The qualifying period generally started when work began to resolve the uncertainty and ended when it was resolved or the work stopped. Records of the technical decisions, tests, setbacks and staff involvement help establish those boundaries. HMRC’s R&D definition explains the test in more detail.
What were the old RDEC rates?
The old RDEC rate depended on when the qualifying expenditure was incurred. For non-ring-fence trades, the most recent historic rates were:
When the expenditure was incurred
Old RDEC rate
Gross credit on £100,000 of qualifying expenditure
1 April 2020 to 31 March 2023
13%
£13,000
From 1 April 2023, in an accounting period under the old scheme
20%
£20,000
Earlier expenditure may be subject to older rates, and separate rates applied to North Sea ring-fence trades. Where a historic accounting period crossed 1 April 2023, the expenditure should be split and the rate applicable to each part used. The rates above are gross and taxable; they are not promises of the amount payable in cash.
For example, if a company’s accounting period began on 1 January 2024, it remained within the old RDEC rules even though that period continued beyond 1 April 2024. If it incurred £100,000 of qualifying costs in June 2024, the 20% rate would produce a £20,000 gross credit. The company would then account for the credit as taxable income and apply the relevant payment steps. HMRC explains the historic rate calculation.
Which costs could be included?
Only costs attributable to qualifying R&D activity could be included. Depending on the accounting period and the specific conditions, old RDEC could cover:
Subcontracting needs particular care. Under old RDEC, a large company generally could not claim payments to an ordinary incorporated R&D subcontractor. Specific payments for work directly undertaken by a qualifying body, an individual or a partnership made up of individuals could qualify. These rules should not be replaced with the different contracted-out R&D rules that apply under the merged scheme. Rent, capital expenditure and legal costs for patents or trademarks were not themselves RDEC cost categories. Check the HMRC cost guidance against the dates and circumstances of the claim rather than applying a current cost list to every historic period.
How was the RDEC credit used?
The old scheme had seven payment steps set out in legislation. They determined whether a claimed credit settled tax, was carried forward or could be paid in cash:
The order and the company’s circumstances affect the outcome. The old scheme’s PAYE restriction also differs from the cap under the merged scheme. HMRC’s old RDEC payment guidance covers the steps in full.
How do you make a claim for an old RDEC period?
Start with the accounting-period dates and the filing deadline. For a period of account lasting no more than 18 months, the usual R&D claim deadline is 24 months after that period ends. A different deadline applies to longer periods of account. The fact that the old scheme has been replaced does not, by itself, establish whether an earlier claim is still in time.
Next, check whether a Claim Notification Form was required. This requirement can apply to accounting periods beginning on or after 1 April 2023, including first-time claimants and some businesses with a gap since their previous claim. The deadline is generally six months after the end of the period of account, which may differ from an individual accounting period.
An Additional Information Form (AIF) is required for new R&D claims made on or after 8 August 2023. It sets out details of the projects and expenditure and must be submitted before the Company Tax Return, even when both are sent on the same day. The claim is then made through the Company Tax Return (CT600), with the RDEC supplementary information in CT600L and supporting Corporation Tax computation.
The company should be able to explain the technological advance, uncertainties, work carried out and the basis for allocating costs to that work. Before filing, check HMRC’s claim steps, notification rules and AIF requirements for the period concerned.
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Old RDEC: – FAQs
The old standalone RDEC scheme was replaced for accounting periods beginning on or after 1 April 2024. The replacement is called the merged RDEC scheme, so the name still appears in current guidance. Read our merged-scheme guide if your accounting period began on or after that date.
Potentially. Old RDEC could produce a payable amount for a company without a Corporation Tax liability, but the credit was taxable and the seven payment steps could restrict or defer the cash received. There was no single net benefit rate that applied to every company.
Possibly. Under the rules for earlier accounting periods, the grant’s terms and the treatment of the funded expenditure could affect whether the former SME scheme, old RDEC or neither route applied to particular costs. The same expenditure could not receive both old SME relief and RDEC.
That depends on the relevant period of account, the filing deadline and whether any required claim notification was made in time. Check those dates before preparing the claim; an accounting period that began before April 2024 is not automatically outside the claim window.
If you are reviewing a claim for an older accounting period, we can help you check the applicable scheme, technical evidence, costs and submission requirements. Book a free consultation to discuss the claim with our team.
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