Hi to All,
One of my clients (limited company) wants to claim R & D allowance in the current year. The company has losses b/f (Say £150,000) to cover current year's profit (say £140,000). Initially my colleague claimed R & D (Say sum of £20,000) against current year's profit and the remaining profit (£120,000) became 'nil' because of the losses b/f.
Now client wants the different treatment. He wants the tax credit from HMRC based on the R & D allowance. Can we claim tax credit in stead of increasing loss amount by adding R & D allowance?
Please give me your thoughts.
Kind Regards
Syed
Replies (5)
Please login or register to join the discussion.
No
Firstly, there is no credit associated with R&D allowances in contrast to Enhanced Capital Allowances or Land Remediation Relief for example.
Secondly, if you are referring to R&D Tax Credit (i.e. uplift available upon revenue expenditure), any loss created must be utilised against current year profits first and is, of course, part of the calculcation of trading profits anyway (so I am guessing you won't have an R&D loss).
Even if a trading loss was created due to the R&D tax credit claim, this must be offset against other profits in the same accounting period first.
See HMRC manuals CIRD 90500.
Put another way
You can only surrender losses created or augmented by R&D for credit repayment. Since the business has made a profit, there is no loss to surrender.
Well at least you had undertaken the correct route initially and the client will not have a tax liability this year and following periods will also be reduced.