Commentary

D1.435B RDEC for large companies—example

Corporate tax
Corporate tax | Commentary

D1.435B RDEC for large companies—example

Corporate tax | Commentary

D1.435B RDEC for large companies—example

The following is an example of the utilisation of RDEC, for commentary see 'Utilisation and payment of RDEC' in D1.435A. It is assumed that for both years the corporation tax rate is 19% and that the RDEC percentage is 13%. The total expenditure on workers is £1.3m in year 1 and £500,000 in year 2. All losses from year 1 are group relieved and are not carried forward to year 2.

Year 1—loss making£m
Turnover9
RDEC (at 13%)1.56
R&D costs(12)
Other costs(7.5)
Profit/(loss) before tax(8.94)
CT dueNil

Step 1

Discharge any corporation tax liability — no liability so RDEC to carry forward to Step 2 is £1.56m.

Step 2

Net value of set off amount is £1.56m – £296,400 (19% × £1.56m) = £1,263,600. The amount carried forward from Step 1 of £1.56m is higher than the net value of the set off amount so the excess

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