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R&D Relief - Surrenderable Loss Definition

How does trading loss restriction interact with surrenderable losses

We are a limited company and SME (first year trading) who are claiming R&D tax relief for y/e 31st March 2018, preferable paid as cash.

  1. Our qualifying spend is £219K, so grossed up by 230% gives £504K enhanced expenditure.
  2. Our trading loss is £227K.

Am I correct in thinking that means our surrenderable loss is restricted to £227K and therefore we can claim a repayment of  a maximum of 14.5% of this amount so £33K, rather than £504K x 14.5% = £73K?

https://www.gov.uk/hmrc-internal-manuals/corporate-intangibles-research-...

  • For expenditure incurred on or after 1 April 2015 the amount of the surrenderable loss is the lesser of:
  • the amount of the unrelieved trading loss sustained in that period; or
  • 230% of the related qualifying R&D expenditure.

All confirmations/corrections much appreciated.

Kind regards

Ben

Replies

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26th Jul 2018 14:26

If your loss is £227k after deducting the R&D enhanced expenditure (£504k), then you can only get a tax repayment based on surrendering the net £227k loss (i.e. £33k - 14.5% of £227k).

Thanks (1)
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By 1146ben
to alan.rolfe
26th Jul 2018 14:46

Net loss is £227K after deducting the expenditure at 100% only (not 230%). I think I therefore also need to deduct another 130% (for the enhanced element) as well to get the correct figure.

Thanks for the steer.

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By Ruddles
26th Jul 2018 14:54

Here’s another steer - appoint an accountant. Anyone with that level of R&D spend should have one

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