Find out how you’ll receive your R&D tax credit through the new merged RDEC scheme. We explain how your company’s profit or loss status influences how benefit is received, like cash credits, tax savings, loss reliefs or combinations.
In this article
- Factors which can determine how your tax credit is received
- Payment routes available
- How we can help
Factors which can determine how your tax credit is received
The scheme
For accounting periods starting on or after April 1 2024, the way your business receives its R&D tax credit has changed. The new scheme offers a credit based on qualifying R&D expenditure, which is treated as
taxable income. The default approach is similar to the old RDEC scheme whereby the credit is first offset against your Corporation Tax liability. If a credit remains after offset, you may receive it as a payable cash amount, subject to certain restrictions.
Practical factors
How you receive the benefit depends on:
- Tax position: Profitable companies usually get tax savings; loss-makers may receive cash credits.
- Group structure & liabilities: Existing HMRC debts or group-wide profits/losses can affect how the benefit is applied.
Preferences
In some cases, a business’ wishes or personal preferences can also influence how they receive tax credits. These include:
- Business needs: Companies may choose between a cash injection or reducing future tax, depending on their priorities.
- For loss-making companies, the credit can be exchanged for cash, though the amount may be lower if you’re not classed as R&D-intensive.
Payment routes available
- Corporation Tax reduction: If your company is profitable, the credit will reduce your Corporation Tax bill, offering straightforward savings.
- Cash credit (payable amount): If you have no tax to pay or the credit exceeds your liability, the remaining amount may be paid as a cash credit, though this is subject to a cap based on PAYE/NIC paid and other conditions.
- Loss relief options: Loss-making companies can:
- Carry losses back one year to reclaim previously paid tax
- Carry losses forward to offset future profits
- Use group relief to offset profits within a group
- Or surrender the enhanced R&D loss for a cash credit
- Combination: In many cases, businesses may benefit from a mix of these routes, depending on their tax profile and how the claim affects their financial position.
Expertise
How we can help
Thanks to our extensive experience, we have a special ability to guide creative companies on R&D tax credits. And we don’t just stop at giving advice, we go above and beyond. With our end-to-end claim service, we take care of all the nitty-gritty details and optimise benefit value. Say goodbye to the headache of figuring everything out on your own and hello to a worry-free experience!
Recover valuable cash by claiming tax relief on eligible innovation and development activities.
Rely on expert support to navigate your HMRC enquiry, protect your claim, and ensure compliance.
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