Corporation Tax Act 2009 (c. 4)

Part 13 U.K. Additional relief for expenditure on research and development

Chapter 7 U.K. [F1 Relief for large companies: vaccine research etc]

Textual Amendments

F1 Pt. 13 Ch. 7 heading substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 30

Introductory U.K.

1085 Overview of Chapter U.K.

(1) This Chapter provides for relief for expenditure incurred by [F2 large companies] on research and development relating to vaccine or medicine research.

(2) Section 1086 defines “qualifying R&D activity” (that is, the research and development in relation to which relief under this Chapter is available).

[F3 (3) The relief available is a deduction under section 1087 (the amount of which is determined under section 1091).]

F4 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F5 (5) Sections 1098 to 1102 contain provision about when a company's expenditure is “qualifying Chapter 7 expenditure” for the purposes of obtaining relief and when such expenditure is “for” an accounting period.]

F6 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) Section 1112 contains an anti-avoidance provision dealing with artificially inflated claims for relief F7 ... under this Chapter.

(8) See also section 1137 for provision about the accounting periods of a company which is not within the charge to corporation tax.

Textual Amendments

F2 Words in s. 1085(1) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 21(2)

F3 S. 1085(3) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 21(3)

F4 S. 1085(4) omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 21(4)

F5 S. 1085(5) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 21(5)

F6 S. 1085(6) omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 21(6)

F7 Words in s. 1085(7) omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 21(7)

1086 Meaning of “qualifying R&D activity” U.K.

(1) For the purposes of this Chapter “qualifying R&D activity” means research and development relating to—

(a) vaccines or medicines for the prevention or treatment of tuberculosis,

(b) vaccines or medicines for the prevention or treatment of malaria,

(c) vaccines for the prevention of infection by human immunodeficiency virus, or

(d) vaccines or medicines for the prevention of the onset, or for the treatment, of acquired immune deficiency syndrome resulting from infection by human immunodeficiency virus in prescribed clades only.

(2) For the purposes of subsection (1) “prescribed clade” means clade A, C, D or E or such other clade or clades as the Treasury may by regulations prescribe.

(3) The Treasury may make provision by regulations further defining the purposes referred to in subsection (1).

(4) In subsection (1) references to vaccines or medicines are to vaccines or medicines for use in humans.

Reliefs U.K.

1087 Deduction in calculating profits of trade U.K.

(1) A company is entitled to corporation tax relief for an accounting period if it meets conditions AF8 ... [F9 , C and D].

(2) Condition A is that the company has incurred expenditure which is qualifying Chapter 7 expenditure for the period.

F10 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) Condition C is that the company is carrying on a trade in the period.

[F11 (4A) Condition D is that the company is a large company throughout the period.]

(5) For the company to obtain the relief it must make a claim.

(6) The relief is a deduction in calculating the profits of the trade for the period.

[F12 (7) For the amount of the deduction see section 1091.]

(8) This section is subject to section 1113 (cap on total R&D aid in relation to a particular research and development project).

(9) See also—

(a) section 1088 for the declaration that a F13 ... company is required to make in a claim under this section,

F14 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) section 1098 for the meaning of “qualifying Chapter 7 expenditure”, and

(d) [F15 section 1100] for the meaning of qualifying Chapter 7 expenditure “for” an accounting period.

Textual Amendments

F8 Word in s. 1087(1) omitted (with effect in accordance with Sch. 3 para. 39 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 7(3)(a)

F9 Words in s. 1087(1) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 22(2)

F10 S. 1087(3) omitted (with effect in accordance with Sch. 3 para. 39 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 7(3)(b)

F11 S. 1087(4A) inserted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 22(3)

F12 S. 1087(7) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 22(4)

F13 Word in s. 1087(9)(a) omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 22(5)(a)

F14 S. 1087(9)(b) omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 22(5)(b)

F15 Words in s. 1087(9)(d) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 22(5)(c)

1088 [F16 Declaration about effect of relief] U.K.

(1) This section applies if a F17 ... company claims relief under section 1087.

(2) The claim must include a declaration that the availability of the relief claimed has resulted in an increase in—

(a) the amount, scope or speed of the research and development undertaken by the company, or

(b) the company's expenditure on research and development.

Textual Amendments

F16 S. 1088 heading substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 23(2)

F17 Word in s. 1088(1) omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 23(1)

F18 1089 SMEs: amount of deduction U.K.

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Textual Amendments

F18 S. 1089 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 24

F19 1090 Modification of section 1089 for larger SMEs U.K.

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Textual Amendments

F19 S. 1090 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 24

1091 [F20 Amount of deduction] U.K.

(1) This section applies if—

(a) a company makes a claim under section 1087 for relief to which it is entitled for an accounting period, F21 ...

F21 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) The amount of the deduction under that section is the sum of—

(a) amount A, and

(b) amount B.

(3) Amount A is 40% of so much of the company's qualifying Chapter 7 expenditure for the period as is allowable as a deduction in calculating for corporation tax purposes the profits for the period of a trade carried on by the company.

(4) Amount B is 140% of so much of the company's qualifying Chapter 7 expenditure for the period that is not so allowable.

(5) The deduction is in addition to any other deduction in respect of the expenditure.

(6) See sections 1098 and 1100 for the meaning of “qualifying Chapter 7 expenditure” and provision about when such expenditure is “for” an accounting period.

Textual Amendments

F20 S. 1091 heading substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 25(2)

F21 S. 1091(1)(b) and the word immediately preceding it omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 25(1)

F22 1092 SMEs: deemed trading loss for pre-trading expenditure U.K.

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Textual Amendments

F22 Ss. 1092-1096 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 26

F22 1093 Modification of section 1092 for larger SMEs U.K.

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Textual Amendments

F22 Ss. 1092-1096 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 26

F22 1094 Relief only available to SME where company is going concern U.K.

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Textual Amendments

F22 Ss. 1092-1096 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 26

Deemed trading loss: further provision U.K.

F22 1095 Elections under section 1092 U.K.

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Textual Amendments

F22 Ss. 1092-1096 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 26

F22 1096 Treatment of deemed trading loss under section 1092 U.K.

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Textual Amendments

F22 Ss. 1092-1096 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 26

Threshold U.K.

F23 1097 R&D threshold U.K.

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Textual Amendments

F23 S. 1097 omitted (with effect in accordance with Sch. 3 para. 39 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 7(5)

Qualifying expenditure U.K.

1098 Meaning of “qualifying Chapter 7 expenditure” U.K.

For the purposes of this Part a company's “qualifying Chapter 7 expenditure” means—

(a) its qualifying expenditure on in-house direct research and development (see section 1101), and

(b) its qualifying expenditure on contracted out research and development (see section 1102).

F24 1099 SMEs: qualifying expenditure “for” an accounting period U.K.

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Textual Amendments

F24 S. 1099 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 26

1100 [F25 Qualifying expenditure “for” an accounting period] U.K.

[F26 (1) A company's qualifying Chapter 7 expenditure is “for” an accounting period if it is allowable as a deduction in calculating for corporation tax purposes the profits for the period of a trade carried on by the company.]

(2) Expenditure allowable as a deduction for the purposes of subsection (1) includes expenditure so allowable because of section 61 (pre-trading expenses).

Textual Amendments

F25 S. 1100 heading substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 27(2)

F26 S. 1100(1) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 27(1)

1101 Qualifying expenditure on in-house direct R&D U.K.

(1) A company's “qualifying expenditure on in-house direct research and development” means expenditure incurred by it in relation to which each of conditions A to E is met.

(2) Condition A is that the expenditure is attributable to qualifying R&D activity (see section 1086) undertaken by the company itself.

(3) Condition B is that the qualifying R&D activity to which the expenditure is attributable is relevant research and development in relation to the company.

(4) Condition C is that the expenditure is—

(a) incurred on staffing costs (see section 1123),

(b) incurred on software or consumable items (see section 1125),

(c) qualifying expenditure on externally provided workers (see section 1127), or

(d) incurred on relevant payments to the subjects of a clinical trial (see section 1140).

(5) Condition D is that the expenditure is not incurred by the company in carrying on activities which are contracted out to the company by any person.

(6) Condition E is that the expenditure is not subsidised (see section 1138).

(7) See sections 1124, 1126 and 1132 for provision about when expenditure within subsection (4)(a), (b) or (c) is attributable to relevant research and development.

1102 Qualifying expenditure on contracted out R&D U.K.

(1) A company's “qualifying expenditure on contracted out research and development” means expenditure in relation to which each of conditions A to D is met.

(2) Condition A is that the expenditure is incurred in making the qualifying element of a sub-contractor payment (see sections 1134 to 1136) to a sub-contractor.

(3) Condition B is that the expenditure is attributable to qualifying R&D activity (see section 1086) undertaken by the sub-contractor itself.

(4) Condition C is that the R&D activity to which the expenditure is attributable is relevant research and development in relation to the company.

(5) Condition D is that the expenditure is not subsidised (see section 1138).

(6) See sections 1124, 1126 and 1132 for provision about when particular kinds of expenditure are attributable to relevant research and development.

Tax credit: entitlement and payment U.K.

F27 1103 Entitlement to and payment of tax credit U.K.

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Textual Amendments

F27 Ss. 1103-1111 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 28

F27 1104 Meaning of “Chapter 7 surrenderable loss” U.K.

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Textual Amendments

F27 Ss. 1103-1111 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 28

F27 1105 Amount of trading loss which is “unrelieved” U.K.

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Textual Amendments

F27 Ss. 1103-1111 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 28

F27 1106 Tax credit only available where company is going concern U.K.

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Textual Amendments

F27 Ss. 1103-1111 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 28

Amount of tax credit U.K.

F27 1107 Amount of tax credit U.K.

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Textual Amendments

F27 Ss. 1103-1111 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 28

F27 1108 Total amount of company's PAYE and NIC liabilities U.K.

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Textual Amendments

F27 Ss. 1103-1111 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 28

Supplementary U.K.

F27 1109 Payment of tax credit U.K.

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Textual Amendments

F27 Ss. 1103-1111 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 28

F27 1110 Tax credit payment not income of company U.K.

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Textual Amendments

F27 Ss. 1103-1111 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 28

F27 1111 Restriction on losses carried forward where tax credit claimed U.K.

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Textual Amendments

F27 Ss. 1103-1111 omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 28

Tax avoidance U.K.

1112 [F28 Artificially inflated claims for relief] U.K.

(1) To the extent that a transaction is attributable to arrangements entered into wholly or mainly for a disqualifying purpose, it is to be disregarded for [F29 the purpose of determining for an accounting period relief to which a company is entitled under this Chapter].

F30 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) Arrangements are entered into wholly or mainly for a “disqualifying purpose” if their main object, or one of their main objects, is to enable a company to obtain—

(a) relief under this Chapter to which it would not otherwise be entitled, [F31 or]

(b) relief under this Chapter of a greater amount than that to which it would otherwise be entitled,

F32 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F32 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) In this section “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.

Textual Amendments

F28 S. 1112 heading substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 29(5)

F29 Words in s. 1112(1) substituted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 29(2)

F30 S. 1112(2) omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 29(3)

F31 Word in s. 1112(3)(a) inserted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by Finance Act 2012 (c. 14), Sch. 3 para. 29(4)(a)

F32 S. 1112(3)(c)(d) omitted (with effect in accordance with Sch. 3 para. 38 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 29(4)(b)