Evaluation of the Research and Development Expenditure Credit (RDEC)

This document describes an evaluation of the effectiveness of the UK's Research and Development Expenditure Credit (RDEC) scheme, aimed at incentivizing business investment in R&D. The RDEC, introduced in April 2013, replaced the Large Company scheme and allows companies, including SMEs and loss-making entities, to claim tax credits for qualifying R&D expenditure. The evaluation used econometric regressions to estimate the user cost elasticity of R&D and the additionality ratio, which measures the additional R&D expenditure generated per pound of tax foregone. Results indicate that the RDEC scheme had an estimated additionality ratio between 2.4 and 2.7, potentially stimulating an additional £5.8bn to £6.5bn in R&D expenditure in 2017-18. The evaluation, however, focused on the intensive margin of R&D expenditure and did not account for new claims or wider economic benefits. The findings are consistent with previous studies and suggest that R&D tax credits are effective in stimulating additional R&D investment, particularly among SMEs which are more credit constrained. The document includes comprehensive data analysis, methodology, and robustness checks, but acknowledges that the additionality ratio may not fully capture the scheme's effectiveness. **This summary was written by an AI model and therefore should not be considered a definitive summary of the report. If you are aware of inaccuracies, please email evaluation.registry@cabinetoffice.gov.uk.**

Description

• Lead department: HM Revenue & Customs (HMRC)
• Evaluation stage: A complete evaluation report
• Other departments: No other departments listed
• Evaluation types: Value for money evaluation; Impact evaluation
• Impact methods: Quasi-experimental method
• Quasi-experimental methods: Instrumental variables
• Value for money methods: Other; Other
• Grant information: This intervention is not distributing funding via a grant
• Government Major Project information: This intervention is not a major project
• Policies: No policies provided

Event Dates

• Event Name: Publication of final results
• Event date: October 2020

Evaluation Costs

• Cost: Not provided

Evaluation sharing

• Link(s) to published report(s): Yes
• Links to evaluation plans: No link provided
• Findings: Not provided
• Permission to share confirmed: Yes