For SMEs claiming R&D tax credits, the accounting treatment is simple: your R&D tax credit is not considered taxable income. It is recognised as a below-the-line benefit and will appear in your income statement (also known as your profit-and-loss account) either as a reduction in Corporation Tax or as a credit.

If your R&D tax credit is calculated before the accounts are finalised, you will adjust your corporation tax position to include the R&D tax credit benefit. If the R&D tax credit is not calculated until after the accounts have been finalised, you can make amendments to the previous tax returns once the claim has been processed.

To account for R&D tax credits, you should identify eligible R&D expenses, calculate the credit, and record it in your accounts. This usually involves creating specific accounting entries for R&D tax credits to reflect the reduction in tax liability or the receipt of the credit.

R&D tax credit accountants manage the entire process, from identifying eligible R&D activities to submitting claims and recording the credits in the financial statements. They ensure the credits are accurately reflected and comply with all relevant accounting standards.

Yes, companies can claim R&D tax credits for previous financial years, subject to certain conditions. This involves revising past financial statements and making prior-year adjustments to account for the credits.

Documentation for R&D tax credits includes detailed records of eligible R&D expenses, calculations of the credit, and supporting evidence for the claim. Accurate and thorough documentation is crucial for compliance and successful claims.

Common challenges include accurately identifying eligible expenses, maintaining thorough documentation, and navigating complex tax regulations. Working with experienced R&D tax credit accountants can help overcome these challenges and ensure successful claims.

Yes, however, it is our preferred practice to submit the amended return so we can keep track of the progress and know what is being submitted.

Any company solving technical problems can potentially qualify for the R&D tax credit scheme, however, HMRC’s guidelines can be tricky to navigate. Through our expertise, we can help identify those with qualifying work.

To record R&D tax credits in accounts, you need to create specific accounting entries. These entries typically involve debiting the tax expense account and crediting the R&D tax credit account when the credit is recognized, and adjusting the entries upon receipt of the credit.

Your SME R&D tax credit claim is a below-the-line benefit. If your claim decreases your tax liability, this should be reflected in your tax line of the income statement and in your Corporation Tax creditor.

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)