R&D expenditure credits and QIPs: what changes from April 2027?

Companies claiming Research and Development Expenditure Credit (RDEC) could benefit from a change to the Corporation Tax Quarterly Instalment Payment (QIP) rules from April 2027.

Announced as part of the Government’s Tax update 2026: simplification, modernisation and fairness, the measure will exclude RDEC, Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC) from augmented profits when determining whether a company falls within the QIP regime.

The change is relatively targeted, but it could have an important cashflow benefit. A company should no longer enter QIPs solely because these above-the-line expenditure credits push its augmented profits above the relevant threshold.

What is changing to RDEC and quarterly instalment payments?

Under the current rules, RDEC is taxable income and can increase the augmented profits used to determine whether a company falls within QIPs.

This means a company could have profits below its applicable QIP threshold but cross it once RDEC income is taken into account.

From April 2027, companies will exclude RDEC, AVEC and VGEC when carrying out this assessment. The Government intends to introduce secondary legislation to amend the definition of augmented profits for QIP purposes.

Importantly, this does not reduce the underlying Corporation Tax liability. Instead, it could change when Corporation Tax needs to be paid.

What are the Corporation Tax QIP thresholds?

A company generally falls within the “large” company QIP regime where its annual profits exceed £1.5 million.

An exemption can apply where profits do not exceed £10 million and the company was not large during the previous 12 months.

Companies also need to consider the associated company rules. The number of associated companies can reduce the £1.5 million and £10 million thresholds. Companies must divide these thresholds by the total number of associated companies, including the company itself.

For example, if a company has two associated companies, there are three companies for the purposes of the calculation. The £1.5 million threshold therefore reduces to £500,000 for each company.

Companies within UK or international structures should therefore consider their wider group and ownership arrangements when assessing whether QIPs apply.

Why does the change matter for companies claiming RDEC?

Large companies within the QIP regime usually pay their Corporation Tax in four instalments. For a standard 12-month accounting period, the first payment falls six months and 13 days after the start of the accounting period. Companies outside the regime will generally pay Corporation Tax nine months and one day after the end of their accounting period.

Moving into QIPs can therefore bring Corporation Tax payments forward significantly.

For businesses close to their applicable threshold, excluding RDEC from augmented profits could help them remain outside QIPs. This may improve cashflow and make Corporation Tax payment timings easier to forecast.

The benefit will depend on the company’s circumstances. If profits already exceed the applicable threshold without the expenditure credit, the company may still fall within QIPs.

Which businesses could be affected?

The change is particularly relevant to growing businesses that claim RDEC and have profits close to their applicable QIP threshold.

It could also be important for companies with associated companies, as the associated company rules can significantly lower the relevant thresholds.

Businesses receiving AVEC or VGEC should consider the change for the same reason.

Companies should review their expected taxable profits, expenditure credits and associated company position as part of their Corporation Tax forecasting ahead of April 2027.

Frequently Asked Questions on R&D expenditure credits and QIPs

How Rayner Essex can help

The interaction between R&D expenditure credits, Corporation Tax and quarterly instalment payments can become complex, particularly where a business has associated companies or profits close to the relevant thresholds.

Our R&D tax and corporate tax specialists can review your position and assess whether the QIP regime applies. We can also help you understand how the April 2027 changes could affect your Corporation Tax payment dates and cashflow planning.

Contact us to talk to our R&D tax specialists to understand how the changes could affect your business.

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