ExpertEasy2 marksMultiple Choice
ACCA · Question 09 · Corporation tax liabilities
Section A
Innovate Ltd is an SME that incurred £100,000 of qualifying Research and Development (R&D) expenditure. Assuming the SME enhanced deduction rate is 86%, what is the total deduction Innovate Ltd can claim against its trading profits for this expenditure?
Section A
Innovate Ltd is an SME that incurred £100,000 of qualifying Research and Development (R&D) expenditure. Assuming the SME enhanced deduction rate is 86%, what is the total deduction Innovate Ltd can claim against its trading profits for this expenditure?
Answer options:
A.
£86,000
B.
£100,000
C.
£186,000
D.
£230,000
How to approach this question
Add the actual expenditure to the enhanced deduction amount (Expenditure x Enhancement Rate).
Full Answer
C.£186,000✓ Correct
Under the SME R&D scheme (using the 86% enhancement rate), a company can deduct its actual qualifying expenditure (£100,000) plus an additional enhancement of 86% of that expenditure (£86,000). The total deduction against trading profits is therefore £186,000.
Common mistakes
Selecting just the enhancement amount (£86,000) instead of the total deduction.
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