Accounting for R&D Tax Credit

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jenny3549
jenny3549 Registered Posts: 472 Dedicated contributor 🦉
in Tax
Hi All,

I'm after a bit of advice if anyone can help, especially from any Sage experts. I'm having one of those days...

We are submitting a claim for R&D Tax Credits for the previous financial year and expect a cheque from HMRC in the region of £10k (due to losses). Lovely jubbly. I am happy not to recognise the cash until we receive it since it is not guaranteed but dependant on the Revenue's view of the suitability of the project but (and this is where I am having a very blonde moment) I'm struggling to decide how to account for it when the time comes.

We use Sage Line 50 which is not always that malleable so the Chart of Accounts is the standard layout. My thinking is simply to Dr Bank and Cr Taxation charge (an account already set up for the P&L). This would effectively show as a negative overhead on the P&L.

Sage layout does not have anyway of showing Profit before Tax or Profit after Tax so I am stuck with treating it this way - I think....

My tiny brain is hurting now.

Anyone able to help at all? (Assuming I have made sense).

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  • JodieR
    JodieR Registered Posts: 1,002 Beyond epic contributor 🧙‍♂️
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    A client I do bookkeeping for got an R&D refund and I set up an 'other income' account on the P&L for it. I can't remember where it ended up in the final accounts though as I didn't do them. I wasn't using sage though.

    Also, I don't know if it applies in your case but in that case the first year the company were behind on their PAYE payments and so the R&D credit was just set against that. I think they also set it against corp tax too sometimes.
  • jenny3549
    jenny3549 Registered Posts: 472 Dedicated contributor 🦉
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    Hi Jodie,

    Thanks for that. We're up to date with PAYE etc and have no CT liability hence opting for the cash option. I was thinking of 'Other Income' also as an option. Just a bit frustrating with Sage, it's not like a spreadsheet where I could put things where I want.

    I know the auditors will rearrange things if they need to after Year End but I have a phobia of not having it right on the Management Accounts sent out to stakeholders (my anal side showing through!).

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