Income and Corporation Taxes Act 1988

Valid from 19/07/2006

Qualifying pre-commencement expenditure U.K.

6 (1) For the purposes of this Schedule, expenditure is “qualifying pre-commencement expenditure” if it meets conditions A to D.

(2) Condition A is that the expenditure is incurred on or after 1st January 2006.

(3) Condition B is that the expenditure is incurred in the course of oil extraction activities.

(4) Condition C is that the expenditure is incurred by a person with a view to carrying on a ring fence trade but before the person sets up and commences the ring fence trade.

(5) Condition D is that the expenditure—

(a) is subsequently allowable as a deduction in calculating the profits of the ring fence trade for the commencement period (whether or not any part of it is so allowable for any post-commencement period), or

(b) is relevant R&D expenditure incurred by an SME.

(6) For the purposes of this paragraph, expenditure incurred by a company is “relevant R&D expenditure incurred by an SME” if—

(a) the company makes an election under paragraph 14 of Schedule 20 to the Finance Act 2000 (R&D tax relief for SMEs: alternative treatment of pre-trading expenditure) in respect of that expenditure, but

(b) the company does not make a claim for an R&D tax credit under that Schedule in respect of that expenditure.

(7) In the case of any qualifying pre-commencement expenditure which is relevant R&D expenditure incurred by an SME, the amount of that expenditure is treated for the purposes of this Schedule as being equal to 150% of its actual amount.

(8) In the case of any qualifying pre-commencement expenditure which is relevant R&D expenditure incurred by a large company, the amount of that expenditure is treated for the purposes of this Schedule as being equal to 125% of its actual amount.

(9) For this purpose “relevant R&D expenditure incurred by a large company” means qualifying expenditure within the meaning given by paragraph 11(3) of Schedule 12 to the Finance Act 2002 (R&D tax relief for large companies).