So you’re eligible for R&D tax credit — great news! The next step is to understand how you’ll receive your generous benefit. There are a number of different ways to go about this which will impact the amount you receive. Depending on your position or your current needs, you can choose the one which is best suited to you and your business. If you need advice, our advisers are always on hand.
We’ve put together a range of different scenarios to help illustrate how your R&D tax credit benefit can be received, depending on your company position.
A | Taxable profit/(loss) before R&D | £200,000 |
B | Applicable CT Rate | 19% |
C = A*B | CT liability before R&D | £38,000 |
D | Eligible R&D Expenditure | £100,000 |
E = D * 130% | R&D Enhanced Deduction | £130,000 |
F = (A-E) * B | CT Liability after R&D | £13,300 |
G = C – F | Overall benefit | £24,700 |
H = G/D | Overall benefit % | 24.7% |
Legislation dictates we must surrender the lesser of the ‘enhanced’ expenditure (G) and the revised taxable profit/(loss) after R&D (A)-(E). Any remaining losses will be available to carry forward.
A | Taxable profit/(loss) before R&D | (£300,000) |
B | Applicable CT Rate | 19% |
C = A*B | CT liability before R&D | £0 |
D | Eligible R&D Expenditure | £100,000 |
E = D * 130% | R&D Enhanced Deduction | £130,000 |
F = (A-E) * B | CT Liability after R&D | £0 |
G = D + E | Enhanced Expenditure | £230,000 |
H = G * 14.5% | Payable credit | £33,350 |
I = (C – F) + H | Overall benefit | £33,350 |
J = I/D | Overall benefit % | 33.35% |
A | Taxable profit/(loss) before R&D | (£300,000) |
B | Applicable CT Rate | 19% |
C = A*B | CT liability before R&D | £0 |
D | Eligible R&D Expenditure | £100,000 |
E = D * 130% | R&D Enhanced Deduction | £130,000 |
F = (A-E) * B | CT Liability after R&D | £0 |
G = A – E | Revised profit (loss) after R&D | £430,000 |
H = G – A | Losses generated | £130,000 |
I = B*H | CT Saving | £24,700 |
J = B*E | Overall benefit % | 24.7% |
In this example, the tax benefit will be received in the preservation of losses available. No payable credit or refund in corporation tax will be generated for the year of submission.
A | Taxable profit/(loss) before R&D | £300,000 |
B | Losses brought forward into a period | (£1,000,000) |
C | Applicable CT Rate | 19% |
D = A*B | CT liability before R&D | £0 |
E = A | Losses utilised before R&D | £300,000 |
F = B – E | Losses carried forward before R&D | (£700,000) |
G | Eligible R&D Expenditure | £100,000 |
H = G*130% | R&D Enhanced Deduction | £130,000 |
I = I – H | Revised taxable profit (loss) after R&D | £170,000 |
J = B – I | Revised losses carried forward after R&D | (£830,000) |
Please note that whilst HMRC makes every effort to meet these targets, they are not always guaranteed.
14 days from submission.
Once approved by HMRC.
Once approved by HMRC.
28 days from submission.
Once approved by HMRC.
How you decide to claim your R&D tax benefit will dictate at which stage you’ll receive your two invoices from us. These payment terms are agreed upon in your engagement agreement at the start of working with us.
R&D Tax Consultant