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Surrender Losses for R&D Tax Credits

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Did you know you could benefit from the R&D tax credits scheme, even if your company is operating at a loss? In this article, discover how surrendering losses for R&D tax credits works and how Ayming can guide you through the process. 

What is the R&D loss surrender?

The R&D tax credit scheme is designed to benefit all businesses, whether they are operating at a profit or a loss-making financial model. 

Profitable companies benefit by paying less tax on their taxable profit, whereas companies operating at a loss can surrender the loss generated through the SME R&D tax credit scheme for cash or carry the loss over. 

The cash payment equates to up to 10% of your business’ enhanced expenditure (around 18% of your total qualifying expenditure), which can be very tempting to take – but this may not always be the best option for your business. 

How does it work?

To work out how much R&D tax credit your business can claim, you need to do the following sums: 

  1. Eligible expenditure x enhancement rate (86%) = total enhancement figure
  2. Eligible expenditure + total enhancement figure = Enhanced expenditure
  3. Enhanced expenditure x surrender rate (10%) = Tax credit amount

Read more about R&D tax credit calculations in our article about Ayming’s R&D Tax Credit Calculator.

There are two things you can do with your R&D tax credit amount, you can either surrender your losses for a cash payment or carry your loss forward to the following year. Carrying your loss to the following year means that you can counteract your future profits and pay less Corporation Tax as a result. Surrendering your losses for a cash payment may be better in the short term, but there are things to consider before making your final decision. 

To benefit from carrying a loss forward, your company needs to be making a profit. Your business can use the loss to pay less corporation tax and you won’t need to sacrifice as much of your profit to tax. But if you expect your company to continue making a loss, the cash credit may be your better option. 

How Ayming can help

Ayming is Europe’s largest R&D incentives advisor, helping businesses all over the world. With decades of experience and a dedicated team of tax and technical experts, we will ensure you get the most out of your R&D tax credit claim. 

Our experts will guide you through the entire process, to make it as simple and pain-free as possible, as well as advise you on the best options to benefit your business.