I have a limited company client that has been trading for a few years. The company has undertaken some research and development (R&D) and is making a claim for the SME R&D relief in the year ended 30 June 2022. It has a large trading loss in the year that has been enhanced by the 130% deduction for qualifying R&D.

They have chosen to surrender some of the losses in return for the R&D tax credit. My colleague mentioned that the credit is going to be restricted due to the size of the company’s PAYE bill. Is this a new restriction and how does it work?