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It has been confirmed by the Chancellor that the Research and Development Expenditure Credit (RDEC) is to be increased from 12% to 13% on 1 April 2020. The RDEC allows companies to claim an enhanced Corporation Tax deduction or payable credit on qualifying R&D costs. The RDEC replaced the large company scheme that was withdrawn in April 2016. This will help large companies to claim more support for their R&D activities.

There is a separate scheme for smaller companies known as the Small or Medium-sized Enterprise (SME) Scheme. The SME scheme offers more generous reliefs. SMEs can currently claim R&D tax credits of 230% for expenditure.

However, SMEs can elect to claim relief under the RDEC scheme if they are unable to claim relief under the SME scheme because of a grant or subsidy, or because they are carrying out subcontracted R&D work. A company is usually defined as an SME if staff headcount is less than 500 and either turnover is less than €100m, or balance sheet total is less than €86m.

It should be noted that only certain qualifying costs are available for R&D tax reliefs. The government has also said it will consult on whether qualifying R&D tax credit costs should include investments in data and cloud computing.