[F1357CHShortfall in R&D expenditureU.K.
(1)There is a shortfall in R&D expenditure in relation to a trade of a company for a relevant accounting period if the actual R&D expenditure of the trade for the accounting period (as adjusted under subsections (8) to (11)) is less than 75% of the average amount of R&D expenditure.
(2)The amount that is to be added to the actual R&D expenditure for the purposes of section 357CG(5) is an amount equal to the difference between—
(a)75% of the average amount of R&D expenditure, and
(b)the actual R&D expenditure, as adjusted under subsections (8) to (11).
(3)In this section—
(a)the “actual R&D expenditure” of a trade of a company for an accounting period is the amount of R&D expenditure that (ignoring section 357CG(5)) is brought into account in calculating the profits of the trade for the accounting period, and
(b)“R&D expenditure” and “relevant accounting period” have the meaning given by section 357CG(6).
(4)The average amount of R&D expenditure is—
where—
E is the amount of R&D expenditure that—
has been incurred by the company during the relevant period, and
has been brought into account in calculating the profits of the trade for any accounting period ending before the first relevant accounting period, and
N is the number of days in the relevant period.
(5)The relevant period is the shorter of—
(a)the period of 4 years ending immediately before the first relevant accounting period, and
(b)the period beginning with the day on which the company begins to carry on the trade and ending immediately before the first relevant accounting period.
(6)For a relevant accounting period of less than 12 months, the average amount of R&D expenditure is proportionately reduced.
(7)Subsections (8) to (11) apply for the purposes of determining—
(a)whether there is a shortfall in R&D expenditure for a relevant accounting period, and
(b)if there is such a shortfall, the amount to be added by virtue of subsection (2).
(8)If the amount of the actual R&D expenditure for a relevant accounting period is greater than the average amount of R&D expenditure, the difference between the two amounts is to be added to the actual R&D expenditure for the next relevant accounting period.
(9)If—
(a)there is not a shortfall in R&D expenditure for a relevant accounting period, but
(b)in the absence of any additional amount, there would be a shortfall in R&D expenditure for that accounting period,
the remaining portion of the additional amount is to be added to the actual R&D expenditure for the next relevant accounting period.
(10)For the purposes of this section—
“additional amount”, in relation to a relevant accounting period, means any amount added to the actual R&D expenditure for that accounting period by virtue of subsection (8), (9) or (11), and
“the remaining portion” of an additional amount is so much of that amount as exceeds the difference between—
(a)the actual R&D expenditure for the relevant accounting period in the absence of the additional amount, and
(b)75% of the average amount of R&D expenditure.
(11)If—
(a)there is not a shortfall in R&D expenditure for a relevant accounting period, and
(b)there would not be a shortfall in R&D expenditure for that accounting period in the absence of any additional amount,
the additional amount is to be added to the actual R&D expenditure for the next relevant accounting period (in addition to any additional amount so added by virtue of subsection (8)).]
Textual Amendments
F1Pt. 8A inserted (with effect in accordance with Sch. 2 paras. 7, 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 1(1)