An SME incurs £100,000 of qualifying R&D expenditure. Under the SME R&D scheme (using the 86% enhancement rate applicable from 1 April 2023), what is the total deduction from trading profits for this expenditure?

Answer options:

£100,000

£186,000

£230,000

£130,000

How to approach this question

Add the enhancement percentage (86%) to the original expenditure (100%) to find the total deduction (186%).

Full Answer

B.£186,000✓ Correct

For expenditure incurred from 1 April 2023, the SME R&D enhancement rate is 86%. The total deduction is the original expenditure (£100,000) plus the enhanced deduction (£86,000), totaling £186,000.

Common mistakes

Using the pre-April 2023 rate of 130%, which would give £230,000.

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