An SME with a qualifying project can claim a cash refund from HMRC by surrendering losses.
This means that company won’t be able to carry forward tax losses to be offset against future profits.
Key conditions for the a company:
- Cannot have received notified state aid or excessive de minimus aid and expenditure cannot be subsidised by aid.
- Cannot have incurred expenditure on R&D as a subcontractor, on behalf of another company.(But may be able to claim under the Large R&D scheme)
- Be a going concern.
Tax relief
Cash refund = 14.5% x surrenderable loss
Surrenderable losses
Lower of R&D enhanced expenditure (230% x eligible R&D expenditure)
and
Unrelieved trading loss after including the extra R&D tax credits
Example
Eligible R&D expenditure is £200,000.
Enhanced expenditure is £200,000 x 230% = £460,000.
Total unrelieved loss including R&D tax credits (£260,000) = £600,000
The lower figure is £460,000 and 14.5% is £67,000 cash refund.