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Research and development tax relief |
See Also
Adjustment of profit | Expense analysis | Profit and loss account / Income statement (D schedule) | Research and development tax credit calculation
Select from the following headings:
Background | Developing the schedule | Completing the Schedule | Standard Sub-Schedules | Carry Forward | Related Errors | Frequently asked questions
This schedule deals with Research and development relief for SMEs, large companies, SMEs with subsidised or capped expenditure, and SMEs with expenditure sub-contracted from large companies. It also deals with Vaccine research relief.
The schedule may be developed from the Adjustment of profit schedule by selecting Develop > Reliefs or from either the Profit and loss account schedule or Expense analysis schedules, by selecting Develop > Link > Research and development tax relief.
The R&D enhanced expenditure feeds into the CT600.
Some of the data entry cells on this schedule are described in more detail:
Description of expenditure
For each row enter some narrative of the income/expenditure identified.
Date
The date of R&D expenditure should be entered in this column to ensure that items receive the correct percentage uplift appropriate for the date of expenditure, or for long periods, are allocated to the correct period. This will ensure amounts flowing through to the CT600 return are correct.
Amount
For each row enter the amount of income or expenditure recognised in the accounts. This should agree with the amounts shown as charged/(credited) to the P/L in the Reconciliation section at the foot of the schedule.
Amounts capitalised in relation to intangible assets may qualify for R&D uplift, if the provisions of s53 FA2004 are met. Intangible assets that meet these provisions should be analysed on this schedule and also entered on the ?Charged/(credited) other than to P/L? row in the reconciliation section. All other capitalised R&D items should (if the appropriate conditions are met) receive the 100% R&D allowances and not the uplift as per this schedule. These amounts should be entered on the C schedule instead.
Selectors
1. Type of relief
For each amount entered, select the appropriate option: SME; Large; SME with subsidy/capped; SME sub-cont. from large or No uplift.
Note: For earlier builds of the software, if the total expenditure which has been declared as qualifying for some form of uplift is less than the relevant minimum (or the relevant pro-rated amount), then no uplift will be calculated. The software will use either £25,000 or £10,000 as the relevant minimum, depending on the period start date for the computation. If you are claiming R&D relief for a large company, you may need to enter the appointed date for the reduced minimum in the section at the bottom of the schedule. If no date is entered, then the original minimum of £25,000 will be used. For newer files, you will no longer need to populate a date column unless it is a long period of account.
2. Eligible for vaccine relief?
This is set to identify which expenditure qualifies for vaccine research relief.
Note : For earlier builds of the software, a warning prompt will appear if this selector is set to Yes and a date is entered which is before the start date for this relief.
For newer files, you will no longer need to populate a date column unless it is a long period of account. Thus, no warning prompt will appear.
Long periods of account
If the date of expenditure is not completed, the amounts entered will be time apportioned, and the amount of relief in each period will be calculated.
The automatic time apportionment can be overridden by entering a date of expenditure, or by entering the amount relating to the stub period in the override column. The software will then calculate the correct amount for the first period automatically.
R & D expenditure limit
The annual limit will be adjusted accordingly for any period of less than 12 months.
Note that a table is provided at the foot of the schedule, which gives details of the minimum expenditure required in each category, and the qualifying expenditure already entered by the user.
From FY 2005, there is a standard sub-schedule, Research and development tax credit calculation, which allows users to calculate the tax credit available to SMEs.
Alternatively, the amount of the tax credit can be entered directly on the Adjustment of profit schedule.
Descriptions of expenditure entered and links from other D schedules will be carried forward to the next period.
Error | How to solve it |
| Date is pre start date for relief - select No uplift. | This error may occur on earlier builds of the software. This is caused by the user entering a date before 1 April 2002, and selecting Large or SME sub-cont. from large as the Type of relief. To clear the error, select No uplift. This error will not occur on more recent versions. |
| Enter start date | This error occurs when the vaccine relief selector is set to Yes, and a date is entered in the date column, but no date has been entered as the vaccine relief start date. To clear the error, enter the start date for the relief in the vaccine relief start date cell in the review section at the foot of the schedule. For the latest information about the start date for this relief, see the HMRC website. For newer files, it will only be necessary to enter the date column if it is a long period of account. Additionally, the Vaccine Relief start date will be completed automatically for new files. |
| Enter date here | If the schedule has a column for the date of the expenditure, if the Type selector is set to Large or SME sub-cont. from large, this warning prompt will appear if the date is missing. This is because the limit for qualifying expenditure changed and the system needs to know when the expenditure was incurred in order to determine the limit to use. To clear the warning, enter the date that the expenditure was incurred in column B. For newer files, it will not always be necessary to populate a date column, however, if the date column is present in the file, it should be completed to ensure the correct uplift is being applied. |
Question: How do I deal with the situation where the company is claiming R&D tax relief for subcontracted R&D?
Answer: Split out the R&D into two rows covering a) the amount that can be uplifted and set the ?Type? to ?SME? and b) the remainder of the R&D amount and set the ?Type? to ?No uplift?