Accounting for R&D

Hi All
I have a company that has claimed R&D and received a tax rebate, for the current company accounts to be filed with Companies House, can I do the following

Credit Previous Year Tax Adjustment (P/L)
Debit Tax liability or other debtors

Or
Do I amend the previous year accounts to reflect the R&D tax claim

Answers

  • dcmcguren
    dcmcguren Registered, FMAAT, AAT Licensed Accountant Posts: 7
    As tax credits can be challenged at the point of submission (so not guaranteed income) and can be done up to 2 years in arrears, it is not possible to adjust previous years stat accounts once they have been finalised/submitted to CH and the credit is recorded in the current year.

    How depends on the scheme they have used to claim the tax credit. SME credit is below the line adjustment and shown as a negative (CR) against the tax liability as a CT reduction or credit. CT will need to be adjusted if the company is going to complete another R&D claim for the year.

    To post your pre-R&D claim tax charge to the accounts:

    Dr Corporation tax charge (income statement)
    Cr Corporation Tax (balance sheet)

    To reduce your tax charge to reflect your R&D claim:

    Dr Corporation Tax (balance sheet)
    Cr Corporation tax charge (income statement)

    Then, when you are receiving , if you receive a refund of tax paid:

    Dr Bank (balance sheet)
    Cr Corporation Tax (balance sheet)

    Alternatively, if you are expecting a tax credit:

    Dr Corporation Tax (balance sheet)
    Cr Corporation tax charge (income statement)

    Then, when you receive the credit from HMRC:

    Dr Bank (balance sheet)
    Cr Corporation Tax (balance sheet)



    The RDEC scheme is slightly different and for larger companies (and some smaller companies with non-qualifying SME expenditure like subcontractors), as this is an "above the line" credit. ie it affects your taxable income and is typically recorded as "Other Income" (CR).

    The DR's depend on the amount of CT the company has to pay in the previous and current year.

    I highly doubt you have something under the RDEC scheme but mention it just in case.

    This is a decent website and goes through what I have said above.
Privacy Policy