Make the most of your benefit

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.

  • A refund in corporation tax paid
  • A reduction in an upcoming corporation tax liability
  • The generation, increase or preservation of losses available
  • A payable tax credit
  • A reduction in other outstanding tax liabilities

What’s best for me?

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.

Examples are based on the accounting period ending on 31st July 2018

  • Profit SME calculation example

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%

 

  • Loss-making SME calculation – surrender losses

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%

 

  • Loss-making SME calculation – generation of losses

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%

 

  • Profitable SME (with losses brought forward to claiming period) calculation – Preservation of losses

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)

When will I receive my tax benefit?

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.

Our invoice

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.

 Our fee is split into two elements:

  1. Upon our submission of the final claim report to you
  2. On receipt of your tax benefit, or when preservation of tax losses is approved by HMRC

Fergus Watson

R&D Tax Consultant