Could someone please clarify the rules for the R&D tax credit system please. I understand that pre 1st April 2014 the claim was 11% and post 1st April 2014 it is 14.5% but 14.5% of what exactly? Is it the R&D expenditure (in which case, is it the original R&D cost or the enhanced one)? Is it maybe the tax loss? Or maybe the lower of the 2?
For example, if a company has taxable profits of £50k pre R&D claim. Enhanced R&D of £200k reduces this to a loss or £150k - is the 14.5% multiplied by the £200k of the £150k and why?
Any links to the relevant HMRC guidance would be much appreciated - the only one I can find still quotes 11% so I guess is a little out of date!
Any help much appreciated.
Thanks
Replies (7)
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You need to clarify your figures
What was the actual R&D spend? (ie is it included in the profit of £50K?)
In principle, though, the % is applied to the lower of the surrenderable loss - which is the lower of the enhanced R&D loss and the actaul loss available. Using your figures, which may or may not be correct, that would be the £150k.
The guidance at CIRD90500 remains relevant - the only point that needs updated is the % (which is confirmed at CIRD80260).
Why is there unrelieved loss to c/f?
Using your figures:
Profit before R&D claim (but including actual R&D spend) is £50k
Additional R&D relief is £200k (suggesting actual R&D spend is £160k)
So, total enhanced R&D expenditure is £360k and loss after additional deduction is £150k.
If that £150k loss is surrendered for tax credit - at whatever % - that is the end of it. Where are you getting the carry forward loss from?
I understand - I think
But your figures must be different than in the original question. If you started with an overall profit of £50k for the full period (that profit reflecting R&D spend but before enhanced relief) I can't see how you arrive at an unused loss. I know that the straddle comps are tricky so I may be missing something but it doesn't seem to make sense. Perhaps actual numbers would help.
EDIT - worked it through with some numbers of my own and, yes, I can see how an unrelieved loss may arise.