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CTA09/Ss1054 - 1057

An SME may claim a payable R&D tax credit for an accounting period in which it has a surrenderable loss. The claim must be made in a return or an amendment to a return on or before the first anniversary of the filing date for the accounting period - FA98/SCH18/PARA83E (1).

An R&D tax credit is not taxable income of the company.

Going concern (S1057)

A company may only make a claim under section 1054 at a time when it is a going concern. See CIRD81130.

Surrenderable loss (S1055)

A company has a surrenderable loss if in an accounting period the company:

• obtains an additional deduction under section 1044 in calculating the profits of a trade and it makes a trading loss in that period in the trade, or
• it is treated as making a trading loss under section 1045.

For expenditure incurred on or before 31 July 2008 the amount of the surrenderable loss is the lesser of:

• the amount of the unrelieved trading loss sustained in that period

  and

• 150% of the related qualifying R&D expenditure.

For expenditure incurred on or after 1 August 2008 the amount of the surrenderable loss is the lesser 辞蹿:听听听听听听听听听听听听听听听

• the amount of the unrelieved trading loss sustained in that period

  and

• 175% of the related qualifying R&D expenditure

For expenditure incurred on or after 1 April 2011 the amount of the surrenderable loss is the lesser of:

• the amount of the unrelieved trading loss sustained in that period

  and

• 200% of the related qualifying R&D expenditure.

For expenditure incurred on or after 1 April 2012 the amount of the surrenderable loss is the lesser of:

• the amount of the unrelieved trading loss sustained in that period

  and

• 225% of the related qualifying R&D expenditure.

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;

  and

• 230% of the related qualifying R&D expenditure.

For expenditure incurred on or after 1 April 2023 the amount of the surrenderable loss is the lesser of:聽

• The amount of the unrelieved trading loss sustained in that period

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• 186% of the related qualifying R&D expenditure鈥�

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Unrelieved trading loss (S1056)

The amount of the unrelieved trading loss is the amount of the trading loss less the aggregate of:

• any relief that was, or could be obtained by making a claim to set the loss against profits of the same accounting period under CTA10/S37(3)(a),
• any other relief obtained in respect of the loss,
• any amount surrendered to group or consortium members.

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Amount of payable tax credit (S1058)

For expenditure incurred on or before 31 July 2008 amount of payable tax credit that a company is entitled to for an accounting period is the lesser of:

• 16% of the surrenderable loss for that period;
• the company鈥檚 PAYE and NIC liabilities for payment periods ending in that accounting period.

For expenditure incurred on or after 1 August 2008 the amount of payable tax credit that a company is entitled to for an accounting period is the lesser of:

• 14% of the surrenderable loss for that period;
• The company鈥檚 PAYE and NIC liabilities for the payment periods ending in that accounting period.

For expenditure incurred on or after 1 April 2011 the amount of payable tax credit that a company is entitled to for an accounting period is the lesser of:

• 12.5% of the surrenderable loss for that period;
• The company鈥檚 PAYE and NIC liabilities for the payment periods ending in that accounting period.

For expenditure incurred on or after 1 April 2012 the amount of payable tax credit that a company is entitled to for an accounting period is;

• 11% of the surrenderable loss for that period;

For expenditure incurred on or after 1 April 2014聽the amount of payable tax credit that a company is entitled to for an accounting period is;

• 14.5% of the surrenderable loss for that period;

For expenditure incurred on or after 1 April 2023 the amount of payable tax credit that a company is entitled to for an accounting period is the lesser of;聽

• 10% of the surrenderable loss for that period聽

• The sum of 拢20,000 plus 300% of the company鈥檚 relevant expenditure on workers for payment periods that end in the accounting period (CIRD90600)听

Calculation of the payable tax credit for accounting periods spanning 1 April 2023.聽

Corporation tax is assessed and charged by reference to accounting periods. Company profits arising in an accounting period are apportioned between the financial years (FY) in which the accounting period falls. S8(5) CTA09 requires that the profits of an accounting period must be apportioned between financial years by reference to the number of days in the period.聽

Relief on qualifying expenditure may only be calculated at the rate which applied for the FY in which the expenditure was incurred. Where, for example, expenditure which was taken to the balance sheet in one accounting period and then amortised or impaired to the profit & loss account in a later accounting period is the subject of a claim, relief may only be claimed at the rate which applied when the expenditure was incurred.聽

The folowing example assumes that all qualifying expenditure was incurred and taken to the profit & loss account in the same accounting period.聽

Step 1聽

Identify qualifying R&D expenditure, on the basis of when it was incurred, between FY 2022 and FY2023聽

Apply the relevant rate of relief (130% or 86%) to the qualifying expenditure to calculate: -聽

• the relief which the company may claim and聽

• the sum of relief and qualifying expenditure听听

for FYs 2022 & 2023.聽

Step 2聽

The tax profit/loss for the whole accounting period is calculated, deducting the relief calculated above.聽

Step 3聽

聽Where the company has made a loss for the accounting period this should be apportioned by reference to the number of days in each financial year.聽

Step 4聽

Calculate the surrenderable loss and payable tax credit for FY 2022 using the rate of 14.5%聽

Step 5聽

Calculate the surrenderable loss and payable tax credit for FY 2023 using the rate of 10%听听

For the accounting period ended 31 December 2023 Company A incurred the following qualifying expenditure:聽

• FY 2022 (1/1/2023 to 31/3/2023) 拢25,000聽

• FY 2023 (1/4/2023 to 31/12/2023) 拢75,000聽

Taxable profits for the accounting period before R&D relief were 拢30,000聽

Step 1聽

FY 2022.聽

• Relief - 拢32,500 (拢25,000*130%)听

• Relief plus expenditure - 拢57,500 (拢25,000+拢32,500)听

FY 2023聽

• Relief - 拢64,500 (拢75,000*86%)听

• Relief plus expenditure 鈥� 拢139,500 (拢75,000+拢64,500)听

Step 2聽

Profit before R&D relief 拢30,000聽

尝别蝉蝉听

Relief 拢97,000聽

Loss for the period 拢67,000聽

听听

Step 3聽

聽Loss 拢67,000聽

FY 2022 - 拢16,520 ((67,000/365)*90)听

FY2023 -聽 拢50,479 ((67,000/365)*275)听

听听

Step 4聽

Loss - 拢16,520聽

Expenditure plus relief 拢57,500聽

Maximum payable credit 拢2,395.40聽

听听

Step 5聽

Loss - 拢50,479聽

Expenditure plus relief 拢139,500聽

Maximum payable credit 拢5,047.90聽