Module 6: Calculations

Every claim ends in a number, and in all seven countries that number comes from the same sequence: find the base, apply the rate, make the adjustments the scheme requires, work out what is paid in cash, and allow for tax on the benefit itself. This module teaches that sequence so a finance team can set up the calculation for any scheme, check a figure prepared by someone else, and explain the result to a board. The country tracks hold the full arithmetic.

What this module covers

The five steps of every calculation: base, rate, adjustments, refundability and tax on the benefit.
How caps, thresholds and elections change the result, and the order in which to apply them.
A calculation layout that records every input so the figure can be rebuilt a year later.
The form of benefit and headline rate in each of the seven countries.

The five steps

Keep the five steps separate. A single cell that says "credit" hides the judgement calls a reviewer will want to see.

1. Base

The base is the eligible cost pool after every inclusion and exclusion rule has been applied: the output of modules 2 to 5. Some schemes apply the rate to the whole base, some only to spending above a reference amount, and some apply a higher rate to a first tranche and a lower rate above it. Record the base before these adjustments and show each adjustment on its own line.

2. Rate

The headline rate can depend on the size of the company, whether it is profitable or loss-making, how intensive its R&D spending is relative to total spending, or which of two permitted methods it has chosen. Where more than one rate could apply, show the test that decided it and the figure the test used.

3. Adjustments

Caps limit the base (a maximum spend at the full rate) or the benefit (a maximum payout). Thresholds switch a rule on or off (a minimum spend, a turnover level that decides refundability). Elections are choices made on the return that trade one treatment for another: a simpler method for a lower rate, a cash payment for a deduction. Many elections are irrevocable for the year once made, so the decision and its reason belong in the calculation file.

4. Refundability

A credit is only worth its face value if the company can use it (module 1 set out the questions). Show the gross benefit, the tax it reduces, the amount paid out after any cap, and the amount carried forward as four separate lines.

5. Tax on the benefit

Where the benefit is itself taxable, or replaces a deduction the company would otherwise have taken, the net value is lower than the gross figure. A deduction-based scheme works the other way: its value is the deduction multiplied by the company tax rate. Always state whether a figure is gross or net, and at which tax rate.

A calculation layout that survives a year

The figure will be questioned long after its preparers have moved on, so give each input a source and each rule a reference.

Line	What it holds	What goes wrong without it
Cost pool by category	Totals by eligible category, tied to ledger accounts (module 2)	Totals that cannot be tied to the accounts
Apportionment	The share of each cost attributed to the work, and the method (module 3)	One percentage applied to everyone with no basis
Inclusion rules	Contractor percentages, overseas conditions, grant adjustments (modules 4 and 5)	Contractor costs counted in full where only a fraction counts
Reference amount or tranche	Prior year figures where the rule uses them, on the same basis as this year	A reference amount built on a different basis
Rate test	The turnover, intensity, size or status test and the figure it used	The wrong rate for the company's size or status
Caps and payout	Benefit cap, payout cap, amount offset, paid and carried forward	A cash forecast that assumes the whole credit is paid
Net of tax	Benefit after tax on the benefit, or after the deduction forgone	A board paper that overstates the value
Elections	Each election made, the alternative rejected and why	An irrevocable choice nobody can explain

Order of operations

Apply the rules in the order the scheme states them: base, minimum spend test, tranche or reference amount, rate, caps on the benefit, payout and carry forward, then net of tax. In some schemes the cap follows the tax adjustment and in others it precedes it; swapping them changes the payout. Where a scheme offers two methods, calculate both before electing and keep the rejected calculation in the file. The simpler method is not always lower, and the file is the evidence that the election was a decision rather than a default.

Illustrative example

Illustrative example. Harbour Robotics Ltd, a hypothetical company, has an eligible cost base of 100,000 in local currency after modules 2 to 5. It is loss-making this year and has a small payroll. The arithmetic for two countries, using the rates stated on each country's pages:

United Kingdom. Under the main UK scheme the expenditure credit is 20% of qualifying expenditure and is taxable: 20% of £100,000 is £20,000 gross. Notional tax on the credit is deducted at the small profits rate (19%) for loss-making companies, giving a net benefit of 16.2%: £20,000 less £3,800 is £16,200. Payable credits are capped at £20,000 plus 300% of the company's relevant PAYE and National Insurance liabilities, so with a small payroll the amount actually paid may be lower, with the remainder dealt with under the scheme's later steps. Whether the R&D intensive route applies instead is a rate test to record.

Australia. Harbour Robotics has aggregated turnover under A$20 million and pays company tax at 25% as a base rate entity. The refundable offset is the corporate tax rate plus an 18.5% premium, which is 43.5% for a base rate entity taxed at 25%: 43.5% of A$100,000 is A$43,500, refundable where it exceeds the tax due. Under the Australian rules the offset replaces the ordinary deduction for the same costs, so compare it with what that deduction would have been worth: 25% of A$100,000 is A$25,000, leaving the company A$18,500 better off, the premium. Detail: Refundable vs non refundable: Australia.

Across the seven countries

Form of benefit and headline rate for each scheme, in the words of its country page. The country pages and country tracks hold the full rules and elections.

Country	Benefit and headline rate	Refundable
United States	Income tax credit. Regular credit of 20% of qualified research expenses above a base amount, or alternative simplified credit of 14% of qualified research expenses above 50% of the average for the previous three years.	Not refundable. Qualified small businesses can elect to apply up to US$500,000 a year against payroll tax.
United Kingdom	Merged scheme: 20% expenditure credit on qualifying expenditure, taxable. ERIS: an extra 86% deduction (a total deduction of 186%), and a payable credit worth up to 14.5% of the surrenderable loss.	Yes. Payable credits are capped at £20,000 plus 300% of the company's relevant PAYE and National Insurance liabilities.
Ireland	Corporation tax credit. 30% of qualifying expenditure for accounting periods beginning on or after 1 January 2024. 35% where the corporation tax return filing date is on or after 23 September 2027.	Yes. The credit is paid in three instalments.
Canada	Investment tax credit, and a deduction against income. Enhanced rate of 35% on qualified expenditure up to the expenditure limit of C$6 million a year, for most CCPCs and eligible Canadian public corporations. Basic rate of 15%.	For most CCPCs at the enhanced rate, current expenditure is 100% refundable.
Australia	Tax offset. Refundable offset: corporate tax rate plus an 18.5% premium, for aggregated turnover under A$20 million. Non-refundable offset: corporate tax rate plus 8.5% (R&D intensity up to 2%) or 16.5% (above 2%). Offset for expenditure of up to A$150 million a year.	Yes, under A$20 million turnover.
New Zealand	Tax credit. 15% of eligible R&D expenditure. Minimum NZ$50,000 a year, unless you use an approved research provider. Maximum NZ$120 million a year.	In some cases. Refunds are capped, including by reference to labour-related taxes.
Singapore	Enhanced tax deduction. 400% deduction on the first S$400,000 of staff costs and consumables for qualifying R&D carried out in Singapore, each Year of Assessment from YA 2024 to YA 2028. Expenditure above that gets 250%.	No refund of the deduction itself. Optional cash payout: 20% of up to S$100,000 of qualifying expenditure across EIS activities, so up to S$20,000 per Year of Assessment.

Where to go next

Module 1: Scheme mechanics, the three forms of benefit and the questions behind refundability.
R&D incentives by country, the seven schemes side by side.
ASC vs regular method: United States, a two-method choice worked through.
R&D intensity: Australia, how an intensity test selects the rate.
In-House Finance Team Program overview, including the country tracks.