R & D Tax Credits

[Dave-A]

My employer claims R&D tax credits for some of the technology it provides, which can be claimed within two years of year-end. Our claims are not substantial as the work we do is paid for so we can only claim for a 30% enhancement.

Contracts tend to last several months and we claim based on when costs hit P&L and not when the money is spent. So, some costs may be capitalised at year-end, in stock, to be matched against contract revenue next year. I claim the tax credit next year as I am reluctant to get a tax break for a P & L year before the P & L is charged with the costs. Is this correct?

Regards,

Dave-A

[jamesconstantine]

Hi
In my opinion the treatment is correct as you are matching costs against revenue (i.e. writing off the 130% R&D deduction) in the accounting period in which revenue is recognised. That is in accordance with the basis for recognising income. However, you should ensure that you recognise revenue on an accruals basis (e.g. when the company becomes entitled to payment) and not necessarily when the money is received, since the expenditure spans over 1 year.
Hope this helps.

[Dave-A]

Many thanks James !