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
Replies (4)
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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%.
Current year losses only for R&D purposes
You only get credit relief for losses in the period not brought forward losses.
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.