R&D Tax credit relief

R&D Tax credit relief

Didn't find your answer?

Could someone just confirm my intrepretation of the R&D Tax rules.

Client qualifies in all regards for the relief but has profits in the 2 years concerned.

Am I right is saying surrenderable relief (ie16% cashback) is only available for businesses with losses in period being assessed, ie not losses brought forward which is the situation I have.

Also if getting relief actually creates a loss, is this surrenderable. I think not but best to check.

Duane Shield

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By RandD
18th Feb 2009 15:20

Cash Repayment changes in 2008
Remember that from 1st August 2008 the rules changed for SMEs so the cash credit is now 14% instead of 16% and the enhanced deduction is now 175%. This gives an effective benefit rate of the cashback of 24.5% up from 24%.

Micah Levy
http://research-and-development-tax-credits.com

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By User deleted
13th Feb 2009 15:23

Current year losses only for R&D purposes
You only get credit relief for losses in the period not brought forward losses.

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By perpetual
13th Feb 2009 15:01

Ta for reply
Better clarify with a bit more information.

I have losses bfwd from start of business (pre trading) rolled up over 3 years of circa £0.5m. Trade started during year 4 but development continues.

Year 4, was modest loss and R&D claim made by previous accountant.
Year 5, modest profit, no claim made, still previous accountant.
Year 6, reasonable profit, now our job.

Personally I think years 1 - 3 could have been looked at closer, under pre trading rules but cant do anything about that now.

So I have qualifying expenditure in year 5 & 6 but profits in both. Enhanced expenditure will push 5 into a loss but hardly worth bothering over.

So question is can I use the 500k of brought forward. My interpretation is not.

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By Chris Wise
13th Feb 2009 11:01

R&D
If the tax comp without enhanced relief (50%) shows a profit then you simply deduct the additional 50% of qualifying costs from that. If this gives you a loss, then it is attributable to the R&D and you can surrender it against PAYE in the period.
I'm not clear on that the b/f loss you refer to is. If it wouldn't be there in year 1 but for the R&D enhancement, then you make a claim for surrender for that year separately, then you deal with year 2.
If you're saying there was a trade loss in Y1 and c/f to Y2 which has a loss then only the element of R&D loss in Y2 is surrendered. The trade loss element is c/f to the next available profits as you would if R&D wasn't in the picture.
If you're saying that you have a b/f loss that would cover all your profits for the 2 years in question, presumably from Y-1, I think the b/f loss will take priority, but a quick scan of the manuals hasn't confirmed that.

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