[F1104NPayment of R&D expenditure creditU.K.
(1)This section applies if a company is entitled to an R&D expenditure credit for an accounting period under this Chapter.
(2)The amount to which the company is entitled in respect of the R&D expenditure credit (“the set-off amount”) is to be treated in the following way—
Step 1 The set-off amount is to be applied in discharging any liability of the company to pay corporation tax for the accounting period. If any of the set-off amount is remaining, go to step 2.
Step 2 If the amount remaining after step 1 is greater than the net value of the set-off amount (see subsection (3)), that amount is to be reduced to the net value of the set-off amount. For provision about the treatment of the amount deducted under this step from the amount remaining after step 1, see section 104O.
Step 3 If the amount remaining after step 2 is greater than the company's total expenditure on workers for the accounting period (see section 104P)—
(a)that amount is to be reduced to the amount of that expenditure (which may be nil), and
(b)the amount deducted under paragraph (a) from the amount remaining after step 2 is to be treated for the purposes of this section as an amount of R&D expenditure credit to which the company is entitled for its next accounting period.
If any of the set-off amount is remaining, go to step 4.
Step 4 The amount remaining after step 3 is to be applied in discharging any liability of the company to pay corporation tax for any other accounting period. If any of the set-off amount is remaining, go to step 5.
Step 5 If the company is a member of a group, it may surrender the whole or any part of the amount remaining after step 4 to any other member of the group (see section 104R). If no such surrender is made, or any of the set-off amount is otherwise remaining, go to step 6.
Step 6 The amount remaining after step 5 is to be applied in discharging any other liability of the company to pay a sum to the Commissioners under or by virtue of an enactment or under a contract settlement. If any of the set-off amount is remaining, go to step 7.
Step 7 The amount remaining after step 6 is payable to the company by an officer of Revenue and Customs. But this is subject to section 104S (restrictions on payment of R&D expenditure credit).
(3)To determine the net value of the set-off amount for the purposes of step 2 in subsection (2), deduct from the set-off amount amount A and, in the case of a ring fence trade, amount B.
Amount A is the amount equal to the corporation tax that would be chargeable on the set-off amount if—
(a)it did not include any amount treated as an amount of R&D expenditure credit for the accounting period by virtue of step 3 in subsection (2), and
(b)it was an amount of profits (or in the case of a ring fence trade, ring fence profits) of the company for the accounting period and corporation tax on such profits was chargeable at the main rate [F2(or, in the case of ring fence profits, the main ring fence profits rate)].
Amount B is the amount equal to the supplementary charge that would be chargeable on the set-off amount if—
(a)it did not include any amount treated as an amount of R&D expenditure credit for the accounting period by virtue of step 3 in subsection (2), and
(b)it was an amount of adjusted ring fence profits for the accounting period.
(4)In this section—
“adjusted ring fence profits” has the meaning given by section 330(2) of CTA 2010,
“the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs,
“contract settlement” means an agreement made in connection with any person's liability to make a payment to the Commissioners under or by virtue of an enactment,
“ring fence profits” has the meaning given by section 276 of CTA 2010, and
“ring fence trade” has the meaning given by section 277 of CTA 2010.]
Textual Amendments
F1Pt. 3 Ch. 6A inserted (with effect in accordance with Sch. 15 para. 27 of the amending Act) by Finance Act 2013 (c. 29), Sch. 15 para. 1
F2Words in s. 104N(3) inserted (with effect in accordance with Sch. 1 para. 22 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 10