Cash refund for SMEs

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.