To qualify for corporation tax relief under the SME scheme s1044(5) CTA 2009 states that the qualifying R&D expenditure must be allowable as a deduction in calculating the profits of the trade for the period.
Subject to restrictions for certain business-related intangible assets (goodwill, etc.) the general rule for corporation tax relief for the costs of intangible assets is that the tax treatment follows the accounting treatment. It would therefore appear that the company can only receive tax relief for these costs and benefit from the additional R&D deduction when they are amortised.
However, in these circumstance s1308 CTA 2009 provides that R&D expenditure that is not of a capital nature and is brought into account in determining the value of an intangible asset is not prevented from being allowable as a deduction in calculating the company’s profits for corporation tax purposes.
This will therefore work to allow a tax deduction for 100% of the qualifying expenditure incurred in the accounting period which in turn would then qualify for the additional 130% deduction calculated in accordance with the R&D rules in Part 13 of CTA 2009 being the total staff costs and 65% of sub-contractor payments. In turn, s1308 CTA 09 also states that any amortisation shown in the accounts for these costs will not be an allowable deduction for corporation tax purposes.
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