Budget 2013 announced the introduction of a 10% ‘Above the Line’ credit for large company R&D activity.

The ‘Above the Line’ credit is designed to increase the visibility of large company R&D relief and provide greater cash-flow support to companies with no corporation tax liability.

Companies will be able to claim the ‘Above the Line’ tax credit for their qualifying expenditure incurred on or after 1 April 2013.  The credit will be equal to 10% of the qualifying R&D expenditure.  The credit will be fully payable, net of tax, to companies and will not be liable to Corporation Tax.

The ‘Above the Line’ credit scheme will initially be optional and companies will be required to elect to claim R&D relief under this scheme.

Companies that do not elect to claim the ‘Above the Line’ credit will be able to continue claiming R&D relief under the current large company scheme until 31 March 2016.

The ‘Above the Line’ credit will become mandatory from 1 April 2016.

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