CT600 Box 670: R&D Expenditure Credit (RDEC) Explained

Every UK limited company that invests in qualifying research and development can benefit from the Research and Development Expenditure Credit (RDEC) scheme. Box 670 on the CT600 company tax return is where you report this credit — a valuable relief that provides a cash benefit worth up to 15p for every £1 spent on qualifying R&D.

This guide explains what RDEC is, how the 20% credit works, which companies can claim it, and what you need to know when completing Box 670 on your company tax return.

What Is RDEC?

RDEC (Research and Development Expenditure Credit) is a UK government tax relief scheme that rewards companies for investing in innovation. Unlike enhanced deduction schemes, RDEC provides a credit directly against your corporation tax liability — or a cash repayment if your liability is insufficient to absorb it.

From 1 April 2024, the merged RDEC scheme applies to all companies, replacing both the old RDEC scheme for large companies and the SME enhanced deduction. Under the merged scheme, the credit rate is 20% of qualifying R&D expenditure.

So if your company spends £100,000 on qualifying R&D during the accounting period, your RDEC credit is £20,000.

Source: Research and Development (R&D) tax relief — GOV.UK

How RDEC Works: The Step-by-Step Calculation

RDEC is designed to provide a net benefit, but its mechanics are slightly complex because the credit itself is treated as taxable trading income. HMRC's framework works through a series of steps:

1. Calculate the gross credit: 20% of qualifying R&D expenditure
2. Include as trading income: The credit is treated as a receipt of the trade — it increases your taxable profits
3. Apply the PAYE cap: The credit cannot exceed £20,000 plus 300% of the company's relevant PAYE and National Insurance contributions for the period
4. Offset against corporation tax: The credit reduces your corporation tax liability for the period
5. Repayable element: If the credit exceeds your corporation tax liability after other reliefs, the balance can be paid as a cash repayment (subject to the PAYE cap)

The net benefit after corporation tax at the main rate of 25% is approximately 15p per £1 of qualifying spend (£20 credit minus £5 tax on the credit = £15 net). At the 19% small profits rate, the net benefit is approximately 16.2p per £1.

Who Can Claim RDEC?

Under the merged scheme, any UK company subject to corporation tax can claim RDEC, provided:

• The company is undertaking qualifying R&D projects (work that seeks to achieve an advance in science or technology by resolving genuine scientific or technological uncertainty)
• The expenditure is on qualifying costs — staff costs, consumables, software, cloud computing costs, and certain subcontractor payments
• The company has pre-notified HMRC of its intention to claim (required for new claimants for accounting periods from 1 April 2023)

Enhanced R&D Intensive Support (ERIS)

Loss-making R&D intensive SMEs whose qualifying R&D spend exceeds 30% of their total expenditure may be eligible for Enhanced R&D Intensive Support (ERIS) instead. ERIS allows a deduction of 186% of qualifying costs and a payable credit of up to 14.5% of the surrenderable loss — a higher benefit than standard RDEC for eligible companies.

What Qualifies as R&D Expenditure?

The most common qualifying costs under the merged scheme include:

• Staffing costs: Salaries, employer's National Insurance, and pension contributions for employees directly engaged in R&D
• Consumables: Materials used and transformed in the R&D process
• Software and cloud computing: Licences and computing costs attributable to R&D activities
• Subcontractors: Payments to third parties carrying out R&D on your behalf (subject to restrictions)
• Externally provided workers: Payments to agencies for workers engaged in R&D

Business cars, land, and most buildings are not qualifying expenditure.

What Goes in CT600 Box 670?

Box 670 reports the amount of RDEC credit you are claiming for the accounting period.

This figure comes from your R&D tax credit computation — a detailed schedule showing qualifying expenditure, the credit calculation, and the PAYE cap analysis. The computation is typically prepared by an R&D tax specialist or accountant and submitted alongside your CT600.

The amount entered in Box 670 is the gross credit (20% × qualifying expenditure), before the offset against your corporation tax liability. HMRC's processing applies the credit against your tax bill when it receives your return.

Related Boxes

• CT600 Box 530: R&D Credit — reports the total R&D credit claimed
• CT600 Box 660: R&D Enhanced Expenditure — reports enhanced R&D deduction amounts under earlier schemes
• CT600 Box 235 — your adjusted trading profit, which is affected because the RDEC credit is treated as taxable income

The Pre-Notification Requirement

For accounting periods beginning on or after 1 April 2023, companies that have not previously claimed R&D relief must notify HMRC within six months of the end of the accounting period. This pre-notification is submitted via HMRC's online service and must be completed before the actual claim on the CT600.

If you miss the pre-notification deadline, you lose the right to claim for that period. This is a common pitfall for first-time claimants — if you think your company may be eligible, notify HMRC as early as possible.

Common Questions About Box 670

Does RDEC increase my taxable profits?

Yes. Because the RDEC credit is treated as a trading receipt, claiming £20,000 of RDEC credit adds £20,000 to your taxable profits. The net benefit is the credit minus the corporation tax charged on it — roughly 15% of qualifying spend at the 25% main rate.

What is the PAYE cap?

The PAYE cap limits the credit to £20,000 plus 300% of your PAYE and National Insurance liabilities for the period. This prevents companies with no genuine wage bill from claiming large credits. Most companies with real R&D activity and a meaningful salary bill will not be affected.

Can a loss-making company receive a cash payment?

Yes. If your company has no corporation tax liability to offset the credit against, the unused credit can be paid out as a cash repayment — subject to the PAYE cap. This is particularly valuable for early-stage companies and start-ups investing heavily in R&D before reaching profitability.

My accounting period started before April 2024 — which scheme applies?

For accounting periods beginning before 1 April 2024, the old RDEC scheme (for large companies) or SME enhanced deduction applied, depending on company size. The merged scheme only applies to periods beginning on or after 1 April 2024. Your accountant can confirm which scheme applies based on your specific period dates.

Does RDEC affect Box 235 (Adjusted Trading Profit)?

Yes. Because the RDEC credit is treated as trading income, it increases your taxable profits. When completing your CT600, this interaction means your adjusted trading profit (Box 235) will include the RDEC credit as income, and the credit then offsets against your corporation tax liability separately.

Summary

Box 670 on the CT600 reports your RDEC (Research and Development Expenditure Credit) claim. Under the merged scheme for accounting periods from 1 April 2024, the credit rate is 20% of qualifying R&D expenditure, providing a net benefit of approximately 15% after corporation tax at the main rate.

RDEC is one of the most generous tax reliefs available to UK businesses investing in innovation. If your company spends on qualifying research and development, it is worth exploring eligibility — the cumulative benefit over several years can be substantial.

For guidance on related parts of your CT600, see our guides to CT600 Box 530: R&D Credit and CT600 Box 660: R&D Enhanced Expenditure.