CIRD99400 - R&D tax relief: accountancy: adjustment on change of basis

On a change from one accepted accounting practice to another (CTA09/Ss180-186; S261)) the accounting treatment may require that the write off of expenditure on R&D that has previously been charged to the profit and loss account should be deferred and it should be reinstated on the balance sheet instead.

Such a position may occur when a company adopts IAS for the first time CIRD99050. At this time it may be obliged to recognise an asset on the balance sheet by writing back some of the expenditure previously written off through the profit and loss account.

The provisions of CTA09/S183 apply in this situation. No positive adjustment is recognised for tax purposes in respect of the expenses that are required to be written back to the balance sheet. Any subsequent writing down of this written back expenditure will similarly not be deducted in calculating the profit for any period of account after the change. So the R&D tax relief that has already been allowed is not clawed back, but the same expenditure does not attract relief a second time when it is released from the balance sheet. If there are any difficulties in interpreting this provision or its effects with regard to R&D tax relief HMRC officers should seek advice from CTIAA.