| Current tax, including UK corporation tax and Research & Development (R&D) tax credits, is recognised in profit or loss, except for taxes related to revaluations of land and buildings which are recognised in other comprehensive income.
Current tax represents the amount of tax payable (receivable) in respect of taxable profit (loss) for the current, or past, reporting periods. Current tax is measured at the amount expected to be paid (recovered) using the tax rates and laws which have been enacted, or substantively enacted, by the balance sheet date. Where payments to HM Revenue and Customs exceed liabilities owed, an asset is recognised to the extent of the amount of tax recoverable.
The company claims R&D tax relief under the Enhanced R&D Intensive Support Scheme, which provides an increased repayable tax credit for qualifying R&D expenditure by loss-making R&D-intensive small and medium-sized enterprises (SMEs). Where the company qualifies for and claims a repayable R&D tax credit under this scheme, the amount is recognised as a component of current tax in the profit and loss account in the period in which the qualifying R&D expenditure is incurred.
A corresponding tax receivable is recognised within current assets on the balance sheet when the credit is considered probable and can be reliably measured, typically once the claim is prepared and submission is expected. The credit is not contingent on future taxable profits and is accounted for as a receivable from HMRC, rather than a reduction in tax payable. |