CFM95810 - Interest restriction: tax-EBITDA: R&D Tax Relief
TIOPA10/S407(3)(b),(c)
Deductions for relief for expenditure on research and development under CTA09/S1044, s1063, s1068 or s1087, are excluded from the calculation of adjusted corporation tax earnings when determining a company’s tax-EBITDA.
R&D Tax Relief for SMEs
An SME company may claim an additional deduction of 130% of qualifying expenditure incurred on research and development where the R&D is related to a trade which that company carries on or subsequently commences. This additional deduction may also be claimed where a SME company makes a qualifying payment to a subcontractor to carry out the R&D on their behalf.
Further guidance on R&D Tax Relief can be found at CIRD80000.
Vaccine Research Relief for Large Companies
A large company may claim an additional deduction of 40% of qualifying expenditure incurred on research and development relating to vaccines or medicines for the prevention or treatment of:
- Tuberculosis;
- Malaria;
- Human immunodeficiency virus; or
- Acquired Immune Deficiency Syndrome resulting from infection by human immunodeficiency virus in prescribed clades only.
Vaccine Research Relief will be abolished with effect from 1 April 2017, with relief available only in relation to expenditure incurred before that date.
- Further guidance on Vaccine Research Relief can be found at CIRD75000.
Effect for tax-EBITDA purposes
R&D Tax Relief is one of the qualifying tax reliefs specified as an excluded amount in TIOPA10/S407(3).
Any additional deductions received over and above the actual amount of R&D expenditure incurred would have a distorting effect of reducing the earned profit of the company for tax-EBITDA purposes, decreasing the group’s interest capacity.
Consequently, additional relief received for expenditure on research and development under CTA09/S1044, s1063, s1068, or s1087 should not be brought into account when calculating taxable total profits of the period to determine a company’s tax-EBITDA.