CIRD90600 - R&D tax relief: SME scheme: payable tax credit: restriction of the credit

FA00/SCH20/PARA18

If a company claims a payable R&D tax credit the Revenue pays it an amount in respect of the credit unless any of the following apply:

• the company has outstanding CT liabilities. If there are outstanding CT liabilities the R&D tax credit may be used to discharge them. If that happens the R&D tax credit is treated as paid to the extent that it is used like that, or
• there is an enquiry into the company’s return for the accounting period for which the R&D tax relief is claimed. In this case, payment may be withheld until the enquiry is completed. You may make provisional payments before the enquiry is completed, or
• the company has outstanding PAYE or Class I NIC liabilities for payment periods ending in the accounting period. R&D tax credit for an accounting period should not be paid/authorised until the company has paid its PAYE and Class 1 NICs for payment periods ending in that accounting period. The payable credit may be used to cover outstanding PAYE and Class 1 NICs liability with the company’s consent.

A payment period is a period that ends on the 5th of the month and for which the company is liable to account for income tax and NIC to HMRC.

The total of the company’s PAYE and NIC liabilities for a payment period is the total of:

• The gross amount of income tax that the company is required to account to HMRC for that period. Ignore any deductions the company is authorised to make for working tax credit and child tax credit.
• The gross Class 1 NICs paid for that payment period. Ignore any deductions the company is authorised to make for statutory sick pay, statutory maternity pay, working tax credit or child tax credit.