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Corporation Tax Act 2009

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Reliefs

1044Additional deduction in calculating profits of trade

(1)A company is entitled to corporation tax relief for an accounting period if it meets each of conditions A to D.

(2)Condition A is that the company is a small or medium-sized enterprise in the period.

(3)Condition B is that the company meets the R&D threshold in the period (see section 1050).

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

(5)Condition D is that the company has qualifying Chapter 2 expenditure which is allowable as a deduction in calculating for corporation tax purposes the profits of the trade for the period.

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

See section 1046 (which prevents a company from making a claim if it is not a going concern).

(7)The relief is an additional deduction in calculating the profits of the trade for the period.

(8)The amount of the additional deduction is 75% of the qualifying Chapter 2 expenditure.

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

(10)For the meaning of “qualifying Chapter 2 expenditure” see section 1051.

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 conditions A, B and C.

(2)Condition A is that the company is a small or medium-sized enterprise in the period.

(3)Condition B is that the company meets the R&D threshold in the period (see section 1050).

(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.

(5)For the company to obtain the relief it must make an election.

See section 1046 (which prevents a company from making an election if it is not a going concern).

(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 175% 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.

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

(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.

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