Luiza, the finance director of Damiana plc, requires advice on the corporation tax treatment of the company’s expenditure on research and development (R&D)

Damiana plc:
– Is a UK resident quoted trading company.

Damiana plc – R&D expenditure:
– Damiana plc is a large company for the purpose of tax relief for R&D expenditure.
– During the year ending 31 March 2018, Damiana plc will incur expenditure on qualifying R&D of £169,000.
– Damiana plc will have taxable total profits, before any deduction in respect of R&D expenditure, of £1,675,000 in the year ending 31 March 2018.

Required:
(a) Explain, with supporting calculations, the tax relief available for the research and development (R&D) expenditure incurred by Damiana plc in the year ending 31 March 2018, and the amount of corporation tax which will be saved as a result of claiming this relief. (5 marks)