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HMRC internal manual

Banking Manual

Banking surcharge: calculation of surcharge profits: research and development expenditure credits


Research & Development Expenditure Credits (RDEC) are given to large companies that are carrying out qualifying research and development (‘R&D’).  (Chapter 6A Part 3 CTA 2009).

The RDEC is a stand-alone credit that is brought into account as a taxable receipt in calculating the profits of large companies.  The credit is a fixed percentage of the expenditure on qualifying R&D.  For profit making companies, the RDEC discharges corporation tax that the company would have to pay.  Companies with no corporation tax liability benefit from the RDEC through either a cash payment or a reduction of tax or other duties due.

Where a banking company is in receipt of RDEC for a chargeable accounting period, a deduction should be made from taxable total profits to exclude the RDEC from the surcharge profits.  This ensures that the financial benefit of the RDEC to the company is not reduced.