(1) This Chapter provides an entitlement to a credit (called an “R&D expenditure credit”) in respect of certain expenditure on research and development.
(2) Section 1042B and 1042C make the basic provision setting out what the entitlement is and how it is to be realised.
(3) Sections 1042D to 1042F describe the expenditure by reference to which the entitlement arises.
(4) Section 1042G sets the percentage of that expenditure that is translated into the credit.
(5) Sections 1042H to 1042N make provision about what happens when a company obtains the credit (in particular, about how the credit is to be accounted for and applied or paid).
(6) Section 1042O makes provision about how the expenditure credit operates in the context of a basic life assurance and general annuity business carried on by an insurance company.
(7) This Chapter has to be read with Chapter 8, which limits the entitlement given by this Chapter in various respects.
(1) A company is entitled to an R&D expenditure credit for an accounting period if it meets conditions A, B and C in this section.
(2) Condition A is that the company carries on a trade in the period.
(3) Condition B is that the company incurs expenditure that is both—
(a) allowable as a deduction in calculating for corporation tax purposes the profits of the trade for the period, and
(b) qualifying Chapter 1A expenditure by virtue of section 1042D, 1042E or 1042F.
(4) Condition C is that the company is not an ineligible company (see section 1142).
(5) The amount of the credit is the relevant percentage (see section 1042G) of the expenditure that satisfies condition B.
(1) To obtain an R&D expenditure credit the company must make a claim (see Part 9A of Schedule 18 to the FA 1998).
(2) A company may not make the claim (“the RDEC claim”) after the end of the claim notification period unless—
(a) the company has made an R&D claim during the period of three years ending with the last day of the claim notification period,
(b) the company makes a claim notification in respect of the RDEC claim within the claim notification period, or
(c) the accounting period in respect of which the RDEC claim is made falls within the same period of account as another accounting period in respect of which the company has made an R&D claim or a claim notification.
(3) For the purposes of subsection (2)(a), ignore any R&D claim for an accounting period beginning before 1 April 2023 that is included in the company’s company tax return only by virtue of an amendment made on or after that date (see paragraph 83B(2) of Schedule 18 to FA 1998).
(1) Expenditure of a company is qualifying Chapter 1A expenditure if it meets each of conditions A to D in this section.
(2) Condition A is that the expenditure is attributable to relevant research and development undertaken by the company itself.
(3) Condition B is that the expenditure is—
(a) incurred on staffing costs (see section 1123),
(b) incurred on software, data licences, cloud computing services 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).
(4) Condition C is that the research and development is not contracted out to the company (see section 1133).
(5) Condition D is that the expenditure is not attributable to an exempt foreign permanent establishment (see section 1138B).
(6) See sections 1124, 1126 to 1126B and 1132 for provision about when expenditure within subsection (3)(a), (b) or (c) is attributable to relevant research and development.
1042E Qualifying expenditure: payments for contracted out R&D
(1) Expenditure of a company is qualifying Chapter 1A expenditure if it meets each of conditions A to D in this section.
(2) Condition A is that the expenditure is attributable to relevant research and development contracted out by the company (see section 1133).
(3) Condition B is that the research and development is not also contracted out to the company (see section 1133).
(4) Condition C is that the expenditure is incurred in making the qualifying element of a contractor payment (see sections 1133 to 1136).
(5) Condition D is that the expenditure is not attributable to an exempt foreign permanent establishment (see section 1138B).
(6) See sections 1124, 1126 to 1126B and 1132 for provision about when particular kinds of expenditure are attributable to relevant research and development.
1042F Qualifying expenditure: activity as contractor for irrelievable client
(1) Expenditure of a company is qualifying Chapter 1A expenditure if it meets conditions A, B and C in this section.
(2) Condition A is that the expenditure is attributable to relevant research and development contracted out to the company (see section 1133).
(3) Condition B is that subsection (4) is satisfied by each person by whom the research and development is contracted out to the company.
(4) A person satisfies this subsection if—
(a) the person is an ineligible company (see section 1142), or
(b) the person is not, in relation to the contracting out of the research and development by that person, acting in the course of a trade, profession or vocation within the charge to tax.
(5) Condition C is that the expenditure would, but for the fact that the research and development is contracted out to the company, be qualifying Chapter 1A expenditure by virtue of section 1042D or 1042E.
1042G Percentage of qualifying expenditure translated into credit
(1) The relevant percentage for the purposes of section 1042B(5) is—
(a) 49%, in the case of a ring fence trade within the meaning given by section 277 of CTA 2010, or
(b) 20%, in any other case.
(2) The Treasury may by regulations replace the percentage for the time being specified in subsection (1)(a) or (b) with a different percentage.
1042H Expenditure credit to count as taxable receipt
If a company is entitled to, and claims, an R&D expenditure credit for an accounting period, it must bring the amount of the credit into account as a receipt in calculating for corporation tax purposes the profits for the period of the trade concerned.
If a company is entitled to, and claims, an R&D expenditure credit for an accounting period, the credit is to be dealt with as follows.
Step 1
The amount of the credit is to be applied in discharging any liability of the company to pay corporation tax for the accounting period.
Step 2
If there is a notional tax deduction (see section 1042K), it is to be applied to any amount remaining after step 1.
Step 3
If the amount remaining after step 2 exceeds the cap by reference to the company’s PAYE and NIC liabilities for the accounting period (see section 1112B), the excess is to be deducted.
Step 4
Any amount remaining after step 3 is to be applied in discharging any liability of the company to pay corporation tax for any other accounting period.
Step 5
If the company is a member of a group, it may surrender the whole or part of any amount remaining after step 4 to any other member of the group (as to which see section 1042N).
Step 6
Any amount remaining after step 5 is to be applied in discharging any other liability of the company to pay a sum to the Commissioners for His Majesty’s Revenue and Customs—
under or by virtue of an enactment, or
under an agreement made in connection with any person’s liability to make a payment to the Commissioners under or by virtue of an enactment.
Step 7
Any amount remaining after step 6 is (subject to sections 1112F and 1112H) to be paid to the company by an officer of Revenue and Customs.
1042J Treatment of deduction to comply with PAYE and NIC limit
(1) This section applies if an amount is deducted under step 3 in section 1042I.
(2) The amount is to be added to the amount of R&D expenditure credit to which the company is entitled for its next accounting period (including where that amount would otherwise be nil).
(1) This section determines the amount of the notional tax deduction for the purposes of step 2 in section 1042I.
(2) The amount of the deduction is the amount (if any) by which the amount remaining after step 1 in section 1042I exceeds the amount produced by deducting the notional tax charge from the initial amount of the expenditure credit (that is, its amount before the application of that step).
(3) Subsections (4) and (5) apply if the trade concerned is not a ring fence trade.
(4) The notional tax charge is the amount of corporation tax that would be chargeable on the initial amount of the expenditure credit if it were an amount of profits for the accounting period on which corporation tax was chargeable at the applicable rate.
(5) The applicable rate is—
(a) the main rate, if the company has profits for the accounting period that—
(i) are chargeable to corporation tax at the main rate, and
(ii) would be so even if they did not include any amount brought into account under section 1042H;
(b) in any other case, the standard small profits rate.
(6) Subsections (7) and (8) apply if the trade concerned is a ring fence trade.
(7) The notional tax charge is the sum of—
(a) the amount of corporation tax that would be chargeable on the initial amount of the expenditure credit if it were an amount of ring fence profits for the accounting period on which corporation tax was chargeable at the applicable rate, and
(b) the amount of the supplementary charge that would be chargeable on the initial amount of the expenditure credit if it were an amount of adjusted ring fence profits for the accounting period (see Chapters 6 to 9 of Part 8 of CTA 2010).
(8) The applicable rate is—
(a) the main ring fence profits rate, if the company has profits for the accounting period that—
(i) are chargeable to corporation tax at the main ring fence profits rate, and
(ii) would be so even if they did not include any amount brought into account under section 1042H;
(b) in any other case, the small ring fence profits rate.
(9) For the purposes of this section, the initial amount of an expenditure credit is to be treated as excluding any amount added under section 1042J.
(10) In this section—
“adjusted ring fence profits” has the meaning given by section 330(2) of CTA 2010;
“main rate” means the rate referred to in section 3(1) of CTA 2010;
“main ring fence profits rate” means the rate referred to in section 279A(1) of CTA 2010;
“ring fence profits” has the meaning given by section 276 of CTA 2010;
“ring fence trade” has the meaning given by section 277 of CTA 2010;
“small ring fence profits rate” means the rate referred to in section 279A(3) of CTA 2010;
“standard small profits rate” means the rate referred to in section 18A(1) of CTA 2010.
(1) This section applies if an amount is deducted under step 2 in section 1042I.
(2) If the company is a member of a group, it may, in respect of the accounting period in which the expenditure credit arises, surrender the whole or part of the deducted amount to any other member of the group (as to which see section 1042N).
(3) To the extent that the deducted amount is not surrendered under subsection (2), it is to be applied in discharging any liability of the company to pay corporation tax for any subsequent accounting period.
(1) An amount within subsection (2) is to be applied as described in that subsection before any amount within subsection (3) is applied as described in that subsection.
(2) An amount is within this subsection if it is to be applied under—
(a) section 1042L(3), or
(b) section 1042N(3) as it applies in relation to an amount surrendered under section 1042L(2),
in discharging the liability of a company to pay corporation tax for an accounting period.
(3) An amount is within this subsection if it is to be (or would but for subsection (1) be) applied under—
(a) step 4 in section 1042I, or
(b) section 1042N(3) as it applies in relation to an amount surrendered under step 5 in section 1042I,
in discharging the same liability as an amount within subsection (2).
1042N Amounts surrendered to other group companies
(1) Subsection (3) applies if an amount of expenditure credit is surrendered by the qualifying company to another member of its group under step 5 in section 1042I or under section 1042L(2).
(2) For the purposes of that subsection—
(a) the accounting period in respect of which the surrender is made is “the surrender AP”;
(b) an accounting period of the other group member is an “overlapping AP” if it overlaps with the surrender AP to any extent.
(3) The surrendered amount is to be dealt with as follows.
Step 1
Select an overlapping AP.
Step 2
Calculate the proportion of the overlapping AP that overlaps with the surrender AP, and apply that proportion to the amount of corporation tax payable by the other group member for that overlapping AP.
Step 3
Calculate the proportion of the surrender AP that overlaps with the overlapping AP, and apply that proportion to the surrendered amount.
Step 4
The amount given by step 3 is to be applied in discharging the liability of the other group member to pay the corporation tax mentioned in step 2, up to the amount given by that step.
Step 5
Select another overlapping AP, if there is one, and repeat steps 2 to 4.
Step 6
If any of the surrendered amount remains after steps 2 to 4 have been taken in relation to each overlapping AP, the remainder is to be treated for the purposes of section 1042I or (as the case may be) section 1042L(2) as if it had not been surrendered as mentioned in subsection (1).
(4) A surrender to which subsection (3) applies is not to be—
(a) taken into account in determining, for corporation tax purposes, the profits or losses of the qualifying company or the other group member, or
(b) regarded for corporation tax purposes as the making of a distribution.
(5) Subsection (6) applies (in addition to subsection (3)) if—
(a) the qualifying company and the other group member have an agreement between them in relation to the surrendering of amounts of expenditure credit, and
(b) as a result of the agreement the other group member makes a payment to the qualifying company that does not exceed the total amount of expenditure credit surrendered to the other group member.
(6) The payment is not to be—
(a) taken into account in determining, for corporation tax purposes, the profits of the qualifying company or the other group member, or
(b) regarded for corporation tax purposes as a distribution.
1042O Adaptation of entitlement for certain insurance businesses
(1) This section applies if—
(a) for an accounting period, an insurance company is charged to tax in respect of its basic life assurance and general annuity business in accordance with the I-E rules, and
(b) the calculation of the company’s charge to tax for the period in respect of that business does not involve the calculation of any BLAGAB trade profit or loss of the company.
(2) The reference in section 1042B(3)(a) to expenditure that is allowable as a deduction in calculating the profits of the trade for an accounting period is to be read as a reference to expenditure that would be so allowable if the company were to calculate its BLAGAB trade profit or loss for the period.
(3) The reference in section 1042H to calculating the profits of the trade is to be read as a reference to calculating the I-E profit of the basic life assurance and general annuity business carried on by the company.
(4) Any receipt to be brought into account by virtue of this section is to be treated for the purposes of section 92 of FA 2012 (certain BLAGAB trading receipts to count as deemed I-E receipts) as if it had been taken into account in calculating the company’s BLAGAB trade profit or loss for the period.
(5) In this section, “BLAGAB trade profit” and “BLAGAB trade loss” have the meanings given by section 136 of FA 2012.
(1) This Chapter provides relief for companies that are small or medium-sized enterprises, invest heavily in research and development, and do not make associated trading profits.
(2) Section 1044 provides relief in the form of an additional deduction where the investment is made in the course of a loss-making trade.
(3) Section 1045 provides relief in the form of a deemed trading loss where the investment is made the course of activities that do not yet amount to the carrying on of a trade.
(4) Section 1045ZA specifies the intensity of spending on research and development needed for a company to qualify for relief under section 1044 or 1045.
(5) Sections 1047 and 1048 make provision about the procedure for claiming, and the effect of, relief under section 1045.
(6) Section 1049 restricts consortium relief where relief under section 1044 or 1045 is claimed.
(7) Sections 1051 to 1053 describe the expenditure by reference to which the entitlement to relief under section 1044 or 1045 arises.
(8) Sections 1054 to 1062 provide further relief in the form of a payable credit (called an “R&D tax credit”) in respect of trading losses increased or generated by relief under section 1044 or 1045.
(9) Section 1062A excludes certain insurance companies.
(10) This Chapter has to be read with Chapter 8, which limits the entitlements given by this Chapter in various respects.
1044 Additional deduction in calculating profits of trade
(1) A company is entitled to corporation tax relief for an accounting period if it meets each of conditions A to F.
(2) Condition A is that the company is a small or medium-sized enterprise in the period.
(2A) Condition B is that the company—
(a) meets the R&D intensity condition in the period, or
(b) obtained relief under this Chapter for its most recent prior accounting period of 12 months’ duration, having met the R&D intensity condition in that period.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) Condition C is that the company carries on a trade in the period.
(5) Condition D is that the company has qualifying Chapter 2 expenditure which is allowable as a deduction in calculating for corporation tax purposes the profits of the trade for the period.
(5A) Condition E is that the company makes a loss in the trade in the period.
(5B) Condition F is that the company is not an ineligible company (see section 1142).
(6) For the company to obtain the relief it must make a claim (see Part 9A of Schedule 18 to the FA 1998, and also sections 1045A and 1112F).
...
(7) The relief is an additional deduction in calculating the profits of the trade for the period. The deduction is, in particular, additional to any given under section 87.
(8) The amount of the additional deduction is 86% of the qualifying Chapter 2 expenditure.
(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10) For the meaning of “qualifying Chapter 2 expenditure” see section 1051.
1045 Alternative treatment for pre-trading expenditure: deemed trading loss
(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.
(2A) Condition B is that the company—
(a) meets the R&D intensity condition in the period, or
(b) obtained relief under this Chapter for its most recent prior accounting period of 12 months’ duration, having met the R&D intensity condition in that period.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(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.
(4A) Condition D is that the company is not an ineligible company (see section 1142).
(5) For the company to obtain the relief it must make an election (see section 1047, and also section 1112F).
...
(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 186% 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(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.
(1) This section determines whether a company meets the R&D intensity condition in an accounting period for the purposes of sections 1044 and 1045.
(2) If the company is not connected with another company, the company meets the condition if its relevant R&D expenditure for the period amounts to at least 30% of its total relevant expenditure for the period.
(3) If the company is connected with at least one other company, the company meets the condition if the connected companies’ relevant R&D expenditure for the period amounts to at least 30% of the connected companies’ total relevant expenditure for the period.
(4) In subsection (3), “the connected companies” refers to the company to which this section is being applied and each company with which it is connected; and the references to their expenditure are to the aggregate of each of their expenditures.
(5) Expenditure forms part of a company’s total relevant expenditure for an accounting period if—
(a) in accordance with generally accepted accounting practice, it is brought into account in calculating the profits for the period of any trade carried on by the company,
(b) it is expenditure in respect of which the company is, for the period, entitled to relief under section 1045, or
(c) in reliance on section 1308(2) (expenditure brought into account in determining value of intangible asset allowable as a deduction), it is brought into account in calculating the company’s profits for the period for corporation tax purposes.
(6) But—
(a) expenditure of a company is to be ignored for the purposes of subsection (5) if it consists of a payment, or other transfer of value, to another company with which the company is connected, and
(b) where expenditure forms part of a company's total relevant expenditure by virtue of subsection (5)(c), a deduction brought into account as mentioned in subsection (5)(a) is to be ignored for the purposes of that provision to the extent that a corresponding deduction for corporation tax purposes is prevented by section 1308(5).
(7) Expenditure forms part of a company’s relevant R&D expenditure for an accounting period if—
(a) it forms part of the company’s total relevant expenditure for the period, or would do but for subsection (6)(a), and
(b) it is expenditure in respect of which the company would, assuming that it met the R&D intensity condition, be entitled to relief under this Chapter for the period.
(8) For the purposes of this section in its application to an accounting period, a company is to be treated as connected with another company if it is connected with that company on any day within the period.
(1) A company may not make a claim under section 1044(6) (an “additional deduction claim”) after the end of the claim notification period unless—
(a) the company has made an R&D claim during the period of three years ending with the last day of the claim notification period,
(b) the company makes a claim notification in respect of the additional deduction claim within the claim notification period, or
(c) the accounting period in respect of which the additional deduction claim is made falls within the same period of account as another accounting period in respect of which the company has made an R&D claim or a claim notification.
(2) For the purposes of subsection (1)(a) ignore any R&D claim for an accounting period beginning before 1 April 2023 that is included in the company’s company tax return only by virtue of an amendment made on or after that date (see paragraph 83B(2) of Schedule 18 to FA 1998).
(1) An election under section 1045 must specify the accounting period in respect of which it is made.
(2) The election must be made by notice in writing to an officer of Revenue and Customs.
(3) The notice must be given before the end of the period of two years beginning immediately after the end of the accounting period to which the election relates.
1048 Treatment of deemed trading loss under section 1045
(1) This section applies if under section 1045 a company is treated as making a trading loss in an accounting period (“the deemed loss-making period”).
(2) The trading loss may not be deducted from profits of a preceding accounting period under section 37(3)(b) or 42 of CTA 2010 unless the company is entitled to relief under section 1045 for the earlier period.
(3) Subsection (4) applies if—
(za) the deemed loss-making period begins before 1 April 2017,
(a) the company begins, in the deemed loss-making period or a later period, to carry on a trade, and
(b) the trade is derived from the research and development in relation to which the relief mentioned in subsection (1) was obtained.
(4) In that case, so far as—
(a) the company has not obtained relief in respect of the trading loss under any other provision, and
(b) the loss has not been surrendered under Part 5 of CTA 2010 (group relief),
the trading loss is to be treated as if it were a loss of that trade brought forward under section 45 of CTA 2010 (relief of trading losses against future trading profits).
(4A) Subsection (4B) applies if—
(a) the deemed loss-making period begins on or after 1 April 2017,
(b) the company—
(i) begins to carry on a trade in the deemed loss-making period which it continues to carry on in the following accounting period, or
(ii) begins to carry on a trade in an accounting period after the deemed-loss making period, and
(c) the trade is derived from the research and development in relation to which the relief mentioned in subsection (1) was obtained.
(4B) In that case, so far as—
(a) the company has not obtained relief in respect of the trading loss under any other provision, and
(b) the loss has not been surrendered under Part 5 of CTA 2010 (group relief) (surrender of relief to group or consortium members),
the trading loss is to be treated as if it were a loss of that trade brought forward under the relevant provision (see subsection (4C)) to the relevant period (see subsection (4D).
(4C) In subsection (4B) “the relevant provision” is—
(a) section 45A(4) of CTA 2010 if—
(i) the trade is not a ring fence trade within the meaning of Part 8 of CTA 2010 (see section 277 of that Act), and
(ii) relief under section 37 of CTA 2010 would not be unavailable by reason of section 44 of that Act for a loss (assuming there was one) made in the trade in the relevant period (see subsection (4D), and
(b) section 45B(2) of CTA 2010 if either of the conditions in paragraph (a) is not met.
(4D) In subsection (4B) and (4C) “the relevant period” means—
(a) in a case where the company began the trade in the deemed loss-making period and continued to carry on the trade in the following accounting period, that following accounting period, and
(b) in a case where the company began the trade in an accounting period after the deemed loss-making period, the accounting period in which the company began the trade.
(5) Subsections (4) and (4B) are subject to section 1062 (restriction on losses carried forward where tax credit claimed).
(1) This section applies if—
(a) a company claims relief under section 1044 or elects to obtain relief under section 1045 in respect of an accounting period,
(b) at any time during the period the company is owned by a consortium, and
(c) at least one of the members of the consortium is a large company.
(2) The amount of the relief obtained in respect of the accounting period may not be surrendered by the company to another company, for the purposes of a consortium group relief claim, unless the other company is a small or medium-sized enterprise.
(3) A “consortium group relief claim” means a claim to group relief based on consortium condition 1, 2 or 3 in sections 132 and 133 of CTA 2010 (group relief available between members of consortia).
For the purposes of this Part a company's “qualifying Chapter 2 expenditure” is such of its expenditure as is qualifying Chapter 2 expenditure by virtue of section 1052, 1053 or 1053A.
(1) Expenditure of a company is qualifying Chapter 2 expenditure if it meets each of conditions A to D in this section.
(2) Condition A is that the expenditure is attributable to relevant research and development undertaken by the company itself.
(3) Condition B is that the expenditure is—
(a) incurred on staffing costs (see section 1123),
(b) incurred on software, data licences, cloud computing services 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).
(4) Condition C is that the research and development is not contracted out to the company (see section 1133).
(5) Condition D is that the expenditure is not attributable to an exempt foreign permanent establishment (see section 1138B).
(6) See sections 1124, 1126 to 1126B and 1132 for provision about when expenditure within subsection (3)(a), (b) or (c) is attributable to relevant research and development.
1053 Qualifying expenditure: payments for contracted out R&D
(1) Expenditure of a company is qualifying Chapter 2 expenditure if it meets each of conditions A to D in this section.
(2) Condition A is that the expenditure is attributable to relevant research and development contracted out by the company (see section 1133).
(3) Condition B is that the research and development is not also contracted out to the company (see section 1133).
(4) Condition C is that the expenditure is incurred in making the qualifying element of a contractor payment (see sections 1133 to 1136).
(5) Condition D is that the expenditure is not attributable to an exempt foreign permanent establishment (see section 1138B).
(6) See sections 1124, 1126 to 1126B and 1132 for provision about when particular kinds of expenditure are attributable to relevant research and development.
1053A Qualifying expenditure: activity as contractor for irrelievable client
(1) Expenditure of a company is qualifying Chapter 2 expenditure if it meets conditions A, B and C in this section.
(2) Condition A is that the expenditure is attributable to relevant research and development contracted out to the company (see section 1133).
(3) Condition B is that subsection (4) is satisfied by each person by whom the research and development is contracted out to the company.
(4) A person satisfies this subsection if—
(a) the person is an ineligible company (see section 1142), or
(b) the person is not, in relation to the contracting out of the research and development by that person, acting in the course of a trade, profession or vocation within the charge to tax.
(5) Condition C is that the expenditure would, but for the fact that the research and development is contracted out to the company, be qualifying Chapter 2 expenditure by virtue of section 1052 or 1053.
(1) A company is entitled to an R&D tax credit for an accounting period if it has a Chapter 2 surrenderable loss in the period (see section 1055).
(2) For the company to obtain an R&D tax credit in respect of all or part of the Chapter 2 surrenderable loss it must make a claim (see Part 9A of Schedule 18 to the FA 1998, and also sections 1054A and 1112F).
...
(3) The amount of an R&D tax credit to which the company is entitled is determined in accordance with section 1058.
(4) If a company makes a claim for an R&D tax credit to which it is entitled for an accounting period, an officer of Revenue and Customs must pay to the company the amount of the credit.
This is subject to section 1112H.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) See also section 1062, which restricts the carry forward of losses where a company claims an R&D tax credit.
(1) A company may not make a claim under section 1054(2) (an “R&D tax credit claim”) after the end of the claim notification period unless—
(a) the company has made an R&D claim during the period of three years ending with the last day of the claim notification period,
(b) the company makes a claim notification in respect of the R&D tax credit claim within the claim notification period, or
(c) the accounting period in respect of which the R&D tax credit claim is made falls within the same period of account as another accounting period in respect of which the company has made an R&D claim or a claim notification.
(2) For the purposes of subsection (1)(a) ignore any R&D claim for an accounting period beginning before 1 April 2023 that is included in the company’s company tax return only by virtue of an amendment made on or after that date (see paragraph 83B(2) of Schedule 18 to FA 1998).
(1) For the purposes of this Chapter a company has a “Chapter 2 surrenderable loss” if in an accounting period—
(a) it obtains an additional deduction under section 1044 in calculating the profits of a trade and it makes a trading loss in that period in the trade, or
(b) it is treated as making a trading loss under section 1045.
(2) If relief is obtained under section 1044 the amount of the Chapter 2 surrenderable loss is—
(a) so much of the trading loss as is unrelieved, or
(b) if less, 186% of the qualifying Chapter 2 expenditure in respect of which the relief was obtained.
(3) If relief is obtained under section 1045 the amount of the Chapter 2 surrenderable loss is so much of the trading loss as is unrelieved.
(1) This section applies for the purposes of section 1055.
(2) The amount of a trading loss that is “unrelieved” is the amount of the loss reduced by—
(a) any relief that was or could have been obtained by the company making a claim under section 37(3)(a) of CTA 2010 to deduct the loss from total profits of the same accounting period,
(b) any other relief obtained by the company in respect of the loss, including relief under section 37(3)(b) or 42 of CTA 2010 (losses deducted from profits of an earlier accounting period), and
(c) any loss surrendered under Part 5 or Part 5A of CTA 2010 (surrender of relief to group or consortium members).
(3) No account is to be taken for this purpose of any losses—
(a) brought forward from an earlier accounting period under section 45, 45A or 45B of CTA 2010, or
(b) carried back from a later accounting period under section 37(3)(b) or 42 of that Act.