Corporation Tax Act 2009

Chapter 8 Cap on aid for R&D

1113 Cap on R&D aid under Chapter 2 or 7

(1) A company is only entitled to qualifying R&D relief in respect of expenditure attributable to a research and development project if, or so far as, the condition in subsection (2) is met at that time.

(2) The condition is that the total R&D aid in respect of expenditure by the company attributable to the project would not exceed 7.5 million euros.

(3) In subsection (2) “total R&D aid” means the total R&D aid calculated—

(a) in accordance with section 1114, and

(b) as if a claim or election had been made for the R&D relief mentioned in subsection (1).

(4) In this Chapter “qualifying R&D relief” means any relief or R&D tax credit under—

(a) Chapter 2 (relief for SMEs: cost of R&D incurred by SME), or

(b) Chapter 7 (relief for SMEs and large companies: expenditure on vaccine research etc).

(5) The Treasury may by regulations—

(a) increase the amount specified in subsection (2), and

(b) amend this Chapter (apart from this section).

1114 Total R&D aid

For the purposes of section 1113 the total R&D aid, in respect of expenditure by a company (“the claimant”) attributable to a research and development project, is calculated as follows—

where—

• A is the total R&D aid,

• TC is the tax credits (see section 1115),

• R is the actual reduction in tax liability (see section 1116),

• P is the potential relief (see section 1117),

• CT is the main rate of corporation tax at the time when the total R&D aid is calculated, and

• N is the notional relief (see section 1118).

1115 “The tax credits”

(1) In section 1114 “the tax credits” means the total R&D tax credits that have been paid to the claimant under Chapter 2 or 7 in respect of expenditure attributable to the research and development project.

(2) An R&D tax credit that has been claimed but not paid or applied is treated for the purposes of subsection (1) as if it had been paid.

(3) Subsection (2) does not apply if the claimant has been informed by Her Majesty’s Revenue and Customs that the R&D tax credit will not be paid or applied.

1116 “The actual reduction in tax liability”

(1) In section 1114 “the actual reduction in tax liability” means the sum of—

(a) amounts within subsection (2), and

(b) amounts within subsection (3).

(2) The amounts within this subsection are those by which the liability of the claimant to pay corporation tax has been reduced in any accounting period in consequence of qualifying R&D relief in respect of expenditure attributable to the research and development project.

(3) The amounts within this subsection are those by which the liability of any other company (“C”) to pay corporation tax has been reduced in any accounting period in consequence of a surrendered loss.

(4) A “surrendered loss” means a loss which—

(a) is surrendered to C by the claimant under section 402 of ICTA (surrender of relief between members of groups and consortia), and

(b) arises in consequence of qualifying R&D relief in respect of expenditure attributable to the project.

1117 “The potential relief”

(1) In section 1114 “the potential relief” means the total amount of any qualifying R&D relief (other than an R&D tax credit)—

(a) in respect of which the claimant has made a claim or election, but

(b) which, as at the day on which the total R&D aid is calculated in accordance with section 1114, has not been brought into account by the claimant or by any other company.

(2) Qualifying R&D relief is not to be counted for the purposes of subsection (1) if the claimant has been informed by Her Majesty’s Revenue and Customs that it is not entitled to the relief.

1118 “The notional relief”

(1) In section 1114 “the notional relief” means the total amount of relief that the claimant could have claimed under Chapter 5 (relief for large companies) in any accounting period in respect of qualifying expenditure attributable to the research and development project if the claimant had been a large company throughout the period.

(2) “Qualifying expenditure” means expenditure that, in the accounting period in question, was—

(a) qualifying Chapter 2 expenditure (see section 1051), or

(b) qualifying Chapter 7 expenditure (see section 1098).