Corporation Tax Act 2009

Tax credit: entitlement and payment

1103 Entitlement to and payment of tax credit

(1) A company is entitled to an R&D tax credit for an accounting period if—

(a) it is a small or medium-sized enterprise in the period, and

(b) it has a Chapter 7 surrenderable loss in the period (see section 1104).

(2) For a company to obtain an R&D tax credit in respect of all or part of the Chapter 7 surrenderable loss it must make a claim.

See section 1106 (which prevents a company from making a claim if it is not a going concern).

(3) The amount of an R&D tax credit to which the company is entitled is determined in accordance with section 1107.

(4) If a company makes a claim for an R&D tax credit to which it is entitled for an accounting period, an officer of Revenue and Customs must pay to the company the amount of the credit.

This is subject to section 1109.

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

(6) See also section 1111, which restricts the carry forward of losses where a company claims an R&D tax credit.

1104 Meaning of “Chapter 7 surrenderable loss”

(1) For the purposes of this Chapter a company has a “Chapter 7 surrenderable loss” if in an accounting period—

(a) it obtains a deduction under section 1087 in calculating the profits of a trade and it makes a trading loss in that period in the trade, or

(b) it is treated as making a trading loss under section 1092.

(2) If relief is obtained under section 1087 the amount of the Chapter 7 surrenderable loss is—

(a) amount A, or

(b) if less, amount B.

(3) Amount A is so much of the trading loss as is unrelieved.

(4) Amount B is the sum of—

(a) the total amount deductible under section 1087, and

(b) so much of the company’s qualifying Chapter 7 expenditure for the period as is expenditure in respect of which the company is not entitled to relief under Chapter 2,

but this is subject to subsection (5).

(5) If the company is a larger SME, amount B is 140% of so much of the company’s qualifying Chapter 7 expenditure for the period as is expenditure in respect of which the company is not entitled to relief under Chapter 2.

(6) If relief is obtained under section 1092 the amount of the Chapter 7 surrenderable loss is so much of the trading loss as is unrelieved.

1105 Amount of trading loss which is “unrelieved”

(1) This section applies for the purposes of section 1104.

(2) The amount of a trading loss that is “unrelieved” is the amount of the loss reduced by—

(a) any relief that was or could have been obtained by the company making a claim under section 393A(1)(a) of ICTA to set the loss against profits of the same accounting period,

(b) any other relief obtained by the company in respect of the loss, including relief under section 393A(1)(b) of that Act (losses set against profits of an earlier accounting period),

(c) any loss surrendered under section 403(1) of that Act (surrender of relief to group or consortium members), and

(d) the amount of any Chapter 2 surrenderable loss (as defined by section 1055) in respect of which an R&D tax credit is claimed under Chapter 2.

(3) No account is to be taken for this purpose of any losses—

(a) brought forward from an earlier accounting period under section 393(1) of ICTA, or

(b) carried back from a later accounting period under section 393A(1)(b) of that Act.

1106 Tax credit only available where company is going concern

(1) A company may only make a claim under section 1103 at a time when it is a going concern.

(2) If a company ceases to be a going concern after making a claim under section 1103, it is treated as if it had not made the claim (and accordingly there is treated as having been no payment of R&D tax credit to carry interest under section 826 of ICTA).

(3) Subsection (2) does not apply so far as the claim relates to an amount that was paid or applied before the company ceased to be a going concern.

(4) For the purposes of this section a company is a going concern if—

(a) its latest published accounts were prepared on a going concern basis, and

(b) nothing in those accounts indicates that they were only prepared on that basis because of an expectation that the company would receive relief or R&D tax credits under Chapter 2 or this Chapter.

(5) Section 436(2) of the Companies Act 2006 (meaning of “publication” of documents) has effect for the purposes of this section.