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R&D tax credits

AntoinnetteAntoinnette Well-KnownRegistered Posts: 118
I successfully claimed R&D tax credits for three companies last year but have a query about how to treat they payments received in this year's accounts. I am slightly worried I may have made an error....
So in the year I claimed the credits I treated it as a tax item (like depreciation and capital allowances) rather than an accounting one and prepared schedules outside the accounts etc and submitted these.
I was also under the impression HMRC dont always agree the amounts so I didn't enter the tax credit amount into the final accounts. Subsequently someone has advised me I should have made a provision for it under corporation tax debtor and I am worried I have to go back and file an amendment of all the statutory accounts. Also as you exchange your losses for the tax credit how can I reflect that in the statutory accounts? This advice just doesn't make sense or I misunderstood what I was told completely

Can someone just tell me in bullet points what they do on the accounting side....my process is:
1. Collate R&D spend from accounts
2. Calculate tax credit due and apply split year treatment if necessary
3. Enter R&D tax credit into tax return
4. Wait to hear from HMRC or receive payment
5. Payment from HMRC goes under other income

How does this compare to what you do?

Thanks

Comments

  • KernowAccountantKernowAccountant Settling In Nicely Registered Posts: 120
    Any R&D payable tax credit is a debtor at the end of the reporting period to which in relates in the same way that any CT repayment resulting from losses arising (perhaps owing to enhanced R&D deductions) would be. Naturally, for a SME greater relief would generally result by not surrendering the loss, but instead claiming the 'usual' relief(s) where possible.

    Debit CT control, credit current year tax charge/credit in the year of the claim.

    So, in "this year's" accounts, the correct entry should be: Debit bank, credit CT control.

    The above payable credit may be taxable or not depending on whether the SME or Large Company scheme applies.

    Sorry to be a pedant but you do not "provide" for an asset, but you recognise it. You provide for a liability.

    I understand that HMRC are taking a particular interest in R&D claims at present, especially those which have not been accompanied with a technical report.
  • AntoinnetteAntoinnette Well-Known Registered Posts: 118
    Thanks for reply KernowAccountant. I will go back and amend the accounts to recognise the asset so I can put the entries in this year to bring it to zero at the end of this year. I think I have treated it like a larger company by putting it as other income. It was claimed under the SME scheme so it shouldn't be taxable. This year they have received state aid so it would be under the Large Company scheme with no repayment

    I have a subcontractor who specialises in R&D tax credits for techy companies and she works with the clients to prepare the technical reports so this was well covered. She also double checked the calculation. It's just the balance sheet I have to sort out at this point.
  • AntoinnetteAntoinnette Well-Known Registered Posts: 118
    ...The balance sheet and P&L I have to sort out!
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