Definition
A surrenderable loss is the portion of a company's tax loss that may be surrendered to HMRC in exchange for a payable R&D tax credit. Under the old SME scheme, the surrenderable loss was the unrelieved loss attributable to the enhanced R&D deduction, converted into cash at the payable credit rate. Under the merged scheme from 1 April 2024, the equivalent concept is the net above-the-line credit after notional tax, which the company may surrender for payment instead of carrying forward as a reduction to future tax.
How HMRC defines it
HMRC guidance on surrenderable loss is at CIRD89600 for the old SME scheme and at CIRD90400 for the merged scheme. The legislation is at sections 1054 to 1057 of the Corporation Tax Act 2009 for the old SME scheme and its equivalents in Chapter 1A of Part 13 for the merged scheme. The PAYE and NIC cap applies to both.
Practical example
A loss-making SME in the year to 31 March 2025 has a merged-scheme above-the-line credit of £50,000 after notional tax. It elects to surrender this credit to HMRC and receives a cash payment of £50,000, subject to the PAYE and NIC cap based on its payroll for the period.