Corporation Tax 2

Question 1

What are 4 examples of qualifying R&D

Answer 1

Revenue Expenditure:
o Anything used on day to day basis- consumables
o Software, licenses, cloud computing services
o Power, water, fuel
o Staff just doing R&D work (scientist/engineer)
 If indirect- qualifies if specifically identifiable as particular part of activity of R&D and accounted for under GAAP or IAS

Capital gets FYA

Question 2

What is additional relief on R&D and how is it included in computation?

Answer 2

Company can elect for RDEC of 20% of qualifying revenue expenditure.

Include this within trading profit calculation (remove R&D from Trading Profit then add RDEC)

Calculate corp tax on TTP then remove RDEC to get CT payable

Question 3

How do you treat payment to sub-contractors?

Answer 3

o If unconnected- can claim 65% of R&D costs (eligible for RDEC) and other 35% is included- assume this is case

o If connected- RDEC claimed on lower of; anything you have been paid as subcontractor or expenditure incurred

Question 4

What relief is given on tax incurred overseas (DTR)

Answer 4

Unilateral relief. Consider and deduct lower of UK tax suffered on overseas income and overseas tax on overseas income