Helping businesses secure and maximise R&D tax credits and grants

R&D Tax Credits soon can be shown Above The Line (ATL). What does this mean?

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HMRC are currently consulting on an “Above the Line” (ATL) for large companies. It is to be introduced in April 2013 following further consultation and will be published in the Finance Bill 2013, making it effective from April 2013. So what does ATL mean?

In essence it is a move from the current superdeduction to a credit offset against corporation tax (which is commonly referred to Above The Line “ATL”). It will show the credit in the P&L account under R&D costs rather than a credit to the P&L tax charge. The actual level of benefit will remain broadly the same and therefore the recent consultation focused on whether the change in reporting format would encourage further R&D activities. The following favourable points were put forward:-

  • Visibility, it would be more visible to the R&D team and show as a offet to their department costs;
  • Certainly over the company’s tax profile. ATL also provides certainty of timing and quantum of benefit;
  • Loss Makers would be able to take immediate benefit from the R&D Tax Credit as the response to the consultation discussed the advantages of paying a taxable credit, although this may be paid in installments or discounted for immediate payment;Potential transfer pricing implications. Is a change required to your transfer pricing policy?;

We believe that ALC does present a number of other practical challenges in the following areas:-

  • How should be responsible for preparing the R&D claims;
  • Accounting policies, disclosures and audit considerations;
  • Incorporation into budget process and communication to budget holders;
  • Accrual of benefit in Management Accounts and Statutory Accounts

However these considerations are certainly not show stoppers and we are in favour of the ALC method of reporting for large companies.

We will continue to consult with HMRC on this subject as we believe that ALC will make the R&D Tax Relief more visible to budget holders and hence decision makers. We fully support the goal of making Britain the European hub of innovation.

If you would like to discuss any aspect of this post further, please do not hesitate to contact us.

Barrie Dowsett ACMA, GCMA
Managing Director


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