Finance Act 2018

29First-year tax creditsU.K.

(1)Schedule A1 to CAA 2001 (first-year tax credits) is amended as follows.

(2)In paragraph 2 (amount of first-year tax credit)—

(a)in sub-paragraph (1)(a), for “19%” substitute “ the applicable percentage ”;

(b)after sub-paragraph (1) insert—

(1A)The applicable percentage is two-thirds of—

(a)the rate of corporation tax chargeable on profits of the qualifying activity concerned for the chargeable period, or

(b)if there is more than one rate, the average of the rates over that period.

(But see also sub-paragraph (3A) (ring fence profits).);

(c)after sub-paragraph (3) insert—

(3A)Where the profits of the qualifying activity are ring fence profits, the applicable percentage is—

(a)two-thirds of the rate of corporation tax (adjusted if necessary as a result of section 279B or 279C of CTA 2010 (marginal relief)) chargeable on those profits for the most recent previous chargeable period in which the company made a profit in carrying on the qualifying activity, or

(b)if the company has never made a profit in carrying on the qualifying activity, two-thirds of the small ring fence profits rate for the chargeable period,

and in either case, if there is more than one rate, assuming tax was chargeable at the average of those rates over the period.

(3B)In this paragraph, “ring fence profits” and “the small ring fence profits rate” have the same meaning as in Part 8 of CTA 2010 (see sections 276 and 279A(4) of that Act).

(3C)Where the applicable percentage given by sub-paragraph (1A) or (3A) would otherwise be a figure with more than 2 decimal places, it is to be rounded up to the nearest second decimal place.;

(d)omit sub-paragraphs (4) and (5).

(3)In paragraph 3(1)(b) (meaning of relevant first-year expenditure) for “31 March 2018” substitute “ 31 March 2023 ”.

(4)In paragraph 24(6) (clawback of first-year tax credit) for “percentage specified in” substitute “ applicable percentage for the purposes of ”.

(5)In consequence of subsection (2)(d), in F(No.2)A 2017, in Schedule 7, omit paragraph 28.

(6)The amendments made by subsections (2), (4) and (5) have effect in relation to chargeable periods beginning on or after 1 April 2018.

(7)Subsection (8) applies if a company has a chargeable period beginning before 1 April 2018 and ending on or after that date (“the straddling period”).

(8)For the purposes of calculating the amount mentioned in paragraph 2(1)(a) of Schedule A1 to CAA 2001—

(a)so much of the straddling period as falls before 1 April 2018, and so much of that period as falls on or after that date, are treated as separate chargeable periods, and

(b)the company's surrenderable loss in the straddling period is to be apportioned between the two separate parts on a just and reasonable basis.