Business Tax- R&D Tax credit and Loss usage is restricted. Why £20,000 restriction?
Article ID
business-tax-rd-tax-credit-and-loss-usage-is-restricted
Article Name
Business Tax- R&D Tax credit and Loss usage is restricted. Why £20,000 restriction?
Created Date
23rd September 2022
Product
Problem
IRIS Business Tax- R&D Tax credit and Loss carry back is being restricted- why? Why is there a £20,000 tax credit restriction?
Resolution
If you have a R&D credit claim and you also have a loss to be used against gains but you cant use it.
Go to Research and Development – SME R&D: Box 660 on the top right is automatically completed and it restricts the loss to be used (It will show in Edit/Losses/Less Adjustment to Tax credits will appear)
If you want to test: On the R&D screen – Reduce the R&D expenditure OR override 660 and change to lower amount or a 0 (this changes the Credit claim). Now Edit/Losses/ you can change the loss carry back to the higher amount BUT you cannot then claim the full credit claim.
For example: £11500 shows on box 660
Edit and Losses: This £11500 will then show on ‘Less Adjustment to Tax credits’ – this restricts the loss and you cannot claim the full loss amount of £63851 – you can only use £52351.
Why a R&D tax credit relief restriction to £20,000 – need to claim full amount
HMRC rules are being applied where your relief is auto restricted to £20,000 unless you have PAYE and NI liabilities. Enter these in the PAYE/NI box to increase the relief amount. OR tick exemption OR tick override for the credit and manually enter the relief amount. If you do tick the 2 options we recommend you add a note to the Tax comp explaining why.
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