CFM95820 | Interest restriction: tax-EBITDA: R&D Expenditure Credits

TIOPA10/S407(3)(a)

R&D expenditure credits ("RDEC") provided by CTA09/S104A are excluded from the calculation of adjusted corporation tax earnings when determining a company's tax-EBITDA.

The RDEC scheme provides a credit of 11% on qualifying expenditure incurred on research and development.

Further guidance on the RDEC scheme can be found at CIRD89700.

Effect for tax-EBITDA purposes

The RDEC scheme is one of the qualifying tax reliefs specified as an excluded amount in TIOPA10/S407(3).

The receipt of an RDEC would have the effect of increasing a group's interest allowance if included as an income item for tax-EBITDA purposes. This would serve to increase the benefit received for companies claiming the RDEC beyond the intention of the original relief.

Consequently, any R&D expenditure credits received under CTA09/S104A should not be brought into account when calculating taxable total profits of the period to determine a company's tax-EBITDA.

Note however that creative expenditure credits introduced by Finance Act 2024, such as the Audio-Visual Expenditure Credit and the Video Games Expenditure Credit are not mentioned in the CIR rules, and so remain included in the tax-EBITDA.