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Research & Development FAQs

Do I have to refile my accounts if I apply for R&D tax credits?

The short, satisfying answer is no, you don’t have to refile your accounts with R&D Tax Credit claim amendments. This is because your accountant can simply record it as a prior year adjustment in your following year’s accounts.

The SME R&D Tax Credit scheme and the large company RDEC scheme have separate, different accounting rules. The good news is that neither one requires you to restate your accounts. Both allow for R&D monies to be part of next year’s accounting period as a ‘prior adjustment’.

Once you’ve had your first claim accepted, we line everything up so your R&D claim matches up with your corporation tax return and accounts time periods. By getting it in before your other deadlines, you end up with lower liabilities and extra cash.

We work with your existing accountant to ensure that your accounting processes are streamlined to include your R&D claim and optimise your overall financial position.

When you do have to restate your accounts in connection with R&D?

Restating your accounts is only a must if they don’t fully adhere to the Companies Act.

What is the accounting treatment for the SME R&D Tax Credit scheme?

The accounting treatment for the SME R&D Tax Credit scheme is, thankfully, quite simple. R&D tax credits only impact on your tax bill because they are considered non taxable income.

You receive R&D Tax Credits either as a credit or a Corporation Tax deduction and this is recorded on your income statement (profit-and-loss account). In accountancy speak, this is also known as a ‘below-the-line benefit’.

You have two reporting options:

  • Prior year adjustment: this is for businesses that cannot calculate the value of their R&D tax credit until they complete their accounts
  • Adjust Corporation Tax amount to include R&D tax credit: you are allowed to put an estimate or the actual amount because the Corporation Tax deadline is normally after the deadline for filing your accounts.

What is the accounting treatment for the RDEC scheme?

Under the RDEC scheme, your R&D tax relief amount is taxable. Accountants call this ‘above-the-line’ credit because you count it as income for the purposes of working out your profit-before-tax.

You can report the gross credit amount as ‘other income’ in the appropriate section of your income statement. Bear in mind that this is only an option, not something that you have to do. It would be wise to seek the advice of your accountant or R&D specialist so you make the best decision for your particular circumstances.

It is possible to include an estimate or actual R&D credit figure in your accounts, or add it as a prior year adjustment to the following year’s accounting period.

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