I am a director and shareholder in an owner-managed company. We have £30,000 of tax credits from a research and development (R&D) tax relief claim. I understand this will reduce our corporation tax bill by £30,000. My question is: does the £30,000 get added to post-tax profits, which can then be used to pay dividends to shareholders? 

Arthur replies: 

The answer to your question is yes; indirectly, you will be able to pay £30,000 more dividends, assuming the dividend rules are complied with. This is because the £30,000 R&D tax credit reduces your tax bill. So, the post-tax profits of the company will be £30,000 higher; hence, the ‘profits available for distribution’ should be higher.