Part 13... expenditure on research and development
Chapter 2Relief for loss-making, R&D-intensive SMEs
Reliefs
1045Alternative treatment for pre-trading expenditure: deemed trading loss
(1)
A company is entitled to corporation tax relief for an accounting period if it meets F1each of conditions A to D.
(2)
Condition A is that the company is a small or medium-sized enterprise in the period.
F2(2A)
Condition B is that the company—
(a)
meets the R&D intensity condition in the period, or
(b)
obtained relief under this Chapter for its most recent prior accounting period of 12 months’ duration, having met the R&D intensity condition in that period.
F3(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)
Condition C is that the company has incurred qualifying Chapter 2 expenditure in the period which—
(a)
is not allowable as a deduction in calculating for corporation tax purposes the profits of a trade carried on by it at the time the expenditure was incurred, but
(b)
would have been so allowable had it, at that time, been carrying on a trade consisting of the activities in respect of which the expenditure was incurred.
F4(4A)
Condition D is that the company is not an ineligible company (see section 1142).
(5)
(6)
The relief is that the company is treated as if it had made a trading loss in the period.
(7)
The trading loss is equal to F7186% of the qualifying Chapter 2 expenditure.
(8)
If a company makes an election under this section in respect of qualifying Chapter 2 expenditure, section 61 (pre-trading expenses) does not apply to the expenditure.
F8(9)
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(10)
For the meaning of “qualifying Chapter 2 expenditure” see section 1051.
(11)
See also section 1137, which makes provision about the accounting periods of a company which is not within the charge to corporation tax.