Development of the R&D expenditure credit (RDEC)

The government announced in the 2011 Autumn Statement that it would introduce an 'Above the Line' (ATL) credit in 2013 to encourage R&D activity by larger companies.

Prior to the introduction of the RDEC, relief had been given as an additional deduction (also known as a super-deduction) in calculating the profits or losses of a large company for corporation tax purposes. However, one of the benefits of the RDEC is that it allows the R&D relief to be to be accounted for in the profit and loss account as a reduction in R&D expenditure, with the associated tax credit being offset against the company's corporation tax liability.

The government believed this will provide a greater amount of visibility of the R&D activities being undertaken by a company.

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