For companies claiming R&D relief for periods beginning on or after 1st April 2023, their entitlement will be calculated on the basis of the new rates implemented by HMRC:
- SMEs trading at a profit or loss can calculate their entitlement based on the R&D enhancement. The R&D enhancement is calculated on 86% of the qualifying expenditure which is then added back onto the qualifying expenditure to give you the enhanced expenditure (186%).
- Entitlement Payable – If the normal taxable profit/trading loss is lower than the R&D enhancement, it leads to a trading loss after R&D. In this case, the surrenderable loss will be a loss after trading relief, and the entitlement payable will be calculated at 10% of this amount.
- Corporation Tax Refund – If the normal taxable profit/trading loss exceeds the R&D enhancement, it leads to a trading profit after R&D with no surrenderable loss. In this case, the entitlement payable will be calculated at the Corporation Tax rate of 25% of the R&D enhancement. This can result in a Corporation Tax reduction or refund if the tax has already been paid.