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How can I accurately incorporate RDEC in my tax computation?

You can show RDEC in your tax computation by first ensuring you’re using the up-to-date rates for the tax year you’re claiming in. Here are the steps HMRC describes

  1. First, the credit is employed to settle the corporation tax liability of the claiming company for the same accounting period.
  2. The remaining balance may undergo an adjustment to reduce it to a net-of-tax amount, which is then available to offset future Corporation Tax liabilities.
  3. Any surplus amount is capped based on the PAYE/NIC (Pay As You Earn/National Insurance Contributions) of the R&D staff (without time spent restrictions on qualifying R&D activity) and externally provided workers from the same group as the claimant (restricted to the proportion of time spent on qualifying R&D activity). Any excess over the cap is carried forward as an expenditure credit for the subsequent accounting period.
  4. The remaining amount, which could potentially become a payable credit, is used to clear any other outstanding liabilities the company has with HMRC.
  5. If the company is part of a group, it may choose to surrender any remaining amount for a corresponding accounting period.

In essence, the payable credit element is applied to satisfy any other financial obligations the company has to HMRC.

Read more about the accounting treatment for RDEC.

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