R&D Tax reliefs: R&D expenditure credit (RDEC) scheme: subsidised qualifying expenditure
Chapter 6A CTA 2009 S104F, G and H
Under GAAP the correct accounting treatment when a subsidy is received is that the subsidy is brought in as a receipt and the subsidised expenditure is recognised in full. Expenditure that is subsidised is therefore deductible in computing the profits of the trade and can attract R&D expenditure credit
There is no provision preventing subsidised expenditure from qualifying for R&D Expenditure Credit.
SMEs are able to claim R&D Expenditure Credit in respect of expenditure that is not allowed under the SME scheme if:
- the expenditure would have been allowable had the SME been a large company, and
- the expenditure does not qualify under the SME scheme only because it was subsidised (CIRD81650) (including a notified state aid CIRD81670).
Such claims will unlike the large company scheme be available for a payable credit providing all other conditions are met.
A Ltd (an SME company) incurs staffing costs of £500,000 in carrying out relevant R&D in an accounting period beginning 1 July 2013.
A charity provides a £100,000 grant toward the staffing costs for the year.
- £400,000 of the staffing costs are qualifying expenditure under the SME scheme; the 125% enhancement is £500,000, and
- £100,000 of the staffing costs are qualifying expenditure under R&D expenditure credit company scheme i.e. at 10% £10,000 and be paid to the company providing all of the other conditions are met.