Corporation Tax Act 2009

1092 SMEs: deemed trading loss for pre-trading expenditure U.K.

(1) A company is entitled to corporation tax relief for an accounting period if it meets each of conditions A to D.

(2) Condition A is that the company is a small or medium-sized enterprise in the period.

(3) Condition B is that the company meets the R&D threshold in the period (see section 1097).

(4) Condition C is that the company has incurred expenditure which is qualifying Chapter 7 expenditure for the period as a result of section 1099(1)(b) (“pre-trading qualifying Chapter 7 expenditure”).

(5) Condition D is that the company is not carrying on a trade in the period.

(6) For the company to obtain the relief it must make an election.

See section 1094 (which prevents a company from making an election if it is not a going concern).

(7) The relief is that the company is treated as if it had made a trading loss in the period.

(8) The amount of the trading loss is—

(a) [F1 20%] of so much of the pre-trading qualifying Chapter 7 expenditure for the period as is expenditure in respect of which the company is also entitled to relief under Chapter 2, and

(b) [F2 120%] of so much of the pre-trading qualifying Chapter 7 expenditure for the period as is expenditure in respect of which the company is not entitled to relief under Chapter 2,

but this is subject to section 1093.

(9) If a company makes an election under this section in respect of pre-trading qualifying expenditure, section 61 (pre-trading expenses) does not apply to the expenditure.

(10) This section is subject to section 1113 (cap on R&D aid in relation to a particular research and development project).

(11) See also section 1137 for provision about the accounting periods of a company which is not within the charge to corporation tax.

(12) See sections 1098 and 1099 for the meaning of “qualifying Chapter 7 expenditure” and provision about when such expenditure is “for” an accounting period.

Textual Amendments

F1 Word in s. 1092(8)(a) substituted (15.9.2011) (with effect in accordance with s. 43(13) of the amending Act) by Finance Act 2011 (c. 11), s. 43(10)(a)(12); S.I. 2011/2280, art. 2

F2 Word in s. 1092(8)(b) substituted (15.9.2011) (with effect in accordance with s. 43(13) of the amending Act) by Finance Act 2011 (c. 11), s. 43(10)(b)(12); S.I. 2011/2280, art. 2