Part 13Additional relief for expenditure on research and development
Chapter 2Relief for SMEs: cost of R&D incurred by SME
Reliefs
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 AF2... and C.
2
Condition A is that the company is a small or medium-sized enterprise in the period.
F33
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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 F1225% 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.