Corporation Tax Act 2009 (c. 4)

Part 13 U.K. Additional relief for expenditure on research and development

Chapter 5 U.K. Relief for large companies

Relief U.K.

1074 Additional deduction in calculating profits of trade U.K.

(1) A company is entitled to corporation tax relief for an accounting period if it meets conditions AF1 ... and C.

(2) Condition A is that the company is a large company throughout the period.

F2 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

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

(7) The amount of the additional deduction is 30% of the qualifying Chapter 5 expenditure which—

(a) is incurred by the company, and

(b) is allowable as a deduction in calculating for corporation tax purposes the profits of the trade for the period.

(8) For the meaning of “qualifying Chapter 5 expenditure” see section 1076.

(9) See also—

(a) section 1080 for special provision about insurance companies,

(b) section 1082 for provision about research and development expenditure of group companies, and

(c) section 1083 for provision about refunds of qualifying Chapter 5 expenditure.

Textual Amendments

F1 Word in s. 1074(1) omitted (with effect in accordance with Sch. 3 para. 39 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 6(2)(a)

F2 S. 1074(3) omitted (with effect in accordance with Sch. 3 para. 39 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 6(2)(b)

Threshold U.K.

F3 1075 R&D threshold U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F3 S. 1075 omitted (with effect in accordance with Sch. 3 para. 39 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 3 para. 6(3)

Qualifying expenditure U.K.

1076 Qualifying Chapter 5 expenditure U.K.

For the purposes of this Part a company's “qualifying Chapter 5 expenditure” means—

(a) its qualifying expenditure on in-house direct research and development (see section 1077),

(b) its qualifying expenditure on contracted out research and development (see section 1078), and

(c) its qualifying expenditure on contributions to independent research and development (see section 1079).

1077 Qualifying expenditure on in-house direct R&D U.K.

(1) A company's “qualifying expenditure on in-house direct research and development” means expenditure incurred by it in relation to which conditions A, B and C are met.

(2) Condition A is that the expenditure is—

(a) incurred on staffing costs (see section 1123),

(b) incurred on software or consumable items (see section 1125),

(c) qualifying expenditure on externally provided workers (see section 1127), or

(d) incurred on relevant payments to the subjects of a clinical trial (see section 1140).

(3) Condition B is that the expenditure is attributable to relevant research and development undertaken by the company itself.

(4) Condition C is that, if the expenditure is incurred in carrying on activities contracted out to the company, the activities are contracted out by—

(a) a large company, or

(b) any person otherwise than in the course of carrying on a chargeable trade.

(5) A “chargeable trade” is—

(a) a trade, profession or vocation carried on wholly or partly in the United Kingdom, the profits of which are chargeable to income tax under Chapter 2 of Part 2 of ITTOIA 2005, or

(b) a trade carried on wholly or partly in the United Kingdom, the profits of which are chargeable to corporation tax under Chapter 2 of Part 3 of this Act.

(6) See sections 1124, 1126 and 1132 for provision about when expenditure within subsection (2)(a), (b) or (c) is attributable to relevant research and development.

1078 Qualifying expenditure on contracted out R&D U.K.

(1) A company's “qualifying expenditure on contracted out research and development” means expenditure incurred by it in relation to which each of conditions A to D is met.

(2) Condition A is that the expenditure is incurred in making payments to—

(a) a qualifying body,

(b) an individual, or

(c) a firm, each member of which is an individual,

in respect of research and development contracted out by the company to the body, individual or firm concerned (“the contracted out R&D”).

(3) Condition B is that the body, individual or firm concerned undertakes the contracted out R&D itself.

(4) Condition C is that the expenditure is attributable to relevant research and development in relation to the company.

(5) Condition D is that, if the contracted out R&D is itself contracted out to the company, it is contracted out by—

(a) a large company, or

(b) any person otherwise than in the course of carrying on a chargeable trade.

(6) A “chargeable trade” is—

(a) a trade, profession or vocation carried on wholly or partly in the United Kingdom, the profits of which are chargeable to income tax under Chapter 2 of Part 2 of ITTOIA 2005, or

(b) a trade carried on wholly or partly in the United Kingdom, the profits of which are chargeable to corporation tax under Chapter 2 of Part 3 of this Act.

(7) See sections 1124, 1126 and 1132 for provision about when particular kinds of expenditure are attributable to relevant research and development.

1079 Qualifying expenditure on contributions to independent R&D U.K.

(1) A company's “qualifying expenditure on contributions to independent research and development” means expenditure incurred by it in relation to which each of conditions A to E is met.

(2) Condition A is that the expenditure is incurred in making payments to—

(a) a qualifying body,

(b) an individual, or

(c) a firm, each member of which is an individual,

for the purpose of funding research and development carried on by the body, individual or firm concerned (“the funded R&D”).

(3) Condition B is that the funded R&D is relevant research and development in relation to the company.

(4) Condition C is that the funded R&D is not contracted out to the qualifying body, individual or firm concerned by another person.

(5) Condition D is that, if the payment is made to an individual, the company is not connected with the individual when the payment is made.

(6) Condition E is that, if the payment is made to a firm (other than a qualifying body), the company is not connected with any member of the firm when the payment is made.

Insurance companies U.K.

1080 Entitlement to relief: I minus E basis U.K.

(1) This section applies if, for an accounting period, an insurance company is charged to tax [F4 in respect of its basic life assurance and general annuity business in accordance with the I - E rules].

[F5 (2) If any additional deduction to which the company would otherwise be entitled under section 1074 is referable, in accordance with Chapter 4 of Part 2 of FA 2012, to the company's basic life assurance and general annuity business, it is to be treated for the purposes of section 76 of that Act as a deemed BLAGAB management expense for the accounting period in question.]

F6 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F7 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F4 Words in s. 1080(1) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 190(2)

F5 S. 1080(2) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 190(3)

F6 S. 1080(3) omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 190(4)

F7 S. 1080(4) omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 190(4)