Legalize / United Kingdom / Public General Act

Corporation Tax Act 2009

Type Public General Act

Publication 2009-03-26

Last updated 2025-04-01

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(b) the company makes an effective creative, technical and artistic contribution to the film or programme, and

(i) is also a co-producer of the co-production, and

(ii) is chargeable to corporation tax on income it receives from the film or programme (or would be if it received any).

(3) Activities carried on in partnership are to be ignored in determining whether a company is the production company for a film or television programme.

1179DQ

(1) A film is a “qualifying co-production” if it falls to be treated as a national film in the United Kingdom under an international agreement.

(2) A television programme is a “qualifying co-production” if it is eligible to be certified under section 1179DM under an international agreement.

(3) A company is a “co-producer” of a qualifying co-production if it is regarded as such under the international agreement by virtue of which the film or television programme in question is a qualifying co-production.

(4) In this section, “international agreement” means an agreement between His Majesty’s Government in the United Kingdom and any other government, international organisation or authority.

Qualifying expenditure and rate of credit

1179DR

(1) Expenditure incurred by the production company for a film or television programme counts as “relevant production expenditure” for the purposes of section 1179CA(2) if—

(a) it is core expenditure in relation to that film or television programme (see section 1179DS), and

(b) it is not excluded expenditure (see sections 1179DT and 1179DU).

(2) But for the purposes of step 1 in section 1179CA(1) as it applies in relation to a certified low-budget film (see section 1179DJA(9))—

(a) no more than £15 million can count towards the total of the production company’s relevant global expenditure, and

(b) UK expenditure counts towards that total before other expenditure.

1179DS

Expenditure is “core expenditure” in relation to a film or television programme if it is expenditure on the pre-production, principal photography or post-production of the film or programme.

1179DT

(1) Expenditure is excluded expenditure to the extent that the production company would, in respect of the expenditure, be able to claim—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) relief under Part 13 (relief for expenditure on research and development).

(2) Expenditure is excluded expenditure for an accounting period to the extent that it is not paid before the end of the period of four months beginning with the first day after the final day of the accounting period.

1179DU

(1) Expenditure is excluded expenditure to the extent that it represents connected party profit, unless subsection (3) applies.

(2) For the purposes of subsection (1), expenditure represents connected party profit—

(a) if it is a payment to a person (“C”) in exchange for something supplied by that person,

(b) if the production company is connected with C, and

(3) This subsection applies if the amount of the payment is no more than would have been the case had the transaction been entered into at arm’s length.

(4) A transaction would have been entered into “at arm’s length” if it made “the arm’s length provision” within the meaning of Part 4 of TIOPA 2010 (and for this purpose any limitation on the application of that Part is to be disregarded).

(5) Subsections (6) and (7) apply if—

(a) the supply by C to the production company is one of a sequence of transactions in which the thing supplied has been supplied by one person to another, and

(b) either—

(i) each transacting party in the sequence is connected to at least one other transacting party in the sequence, or

(ii) each transaction in the sequence is entered into in furtherance of a single scheme or arrangement (of whatever kind, and whether or not legally enforceable).

(6) The reference to C in subsection (2)(c) is to be read as a reference to the supplier in the first transaction in the sequence.

(7) The reference to the transaction in subsection (3) is to be read as including each transaction in the sequence.

(8) In this section, “payment” includes any transfer of value.

1179DV

(1) This section determines the relevant percentage for the purposes of step 5 in section 1179CA (1).

(2) In the case of—

(a) a qualifying film that is not an animation or a certified low-budget film, or

(b) a qualifying television programme that is not an animation or a children’s programme,

the relevant percentage is 34%.

(3) In the case of—

(a) a qualifying film that is an animation but is not a certified low-budget film, or

(b) a qualifying television programme that is an animation or a children’s programme,

the relevant percentage is, subject to the following subsections, 39%.

(4) Subsection (5) applies if, for any accounting period, the production company is entitled to, and claims, an audiovisual expenditure credit on the basis that the film or programme falls within subsection (2).

(5) In relation to any subsequent accounting period, the relevant percentage is 34%.

(5A) In the case of a qualifying film that is a certified low-budget film (see section 1179DJA(9)), the relevant percentage is 53%.

(6) The Treasury may by regulations replace the percentage for the time being specified in subsection (2), (3) , (5) or (5A) with a different percentage.

Accounting for the separate trade

1179DW

For the purposes of section 1179B, the production company for a film or television programme is treated as beginning the separate production trade in respect of the film or programme—

(a) when pre-production of the film or programme begins,

(b) if earlier, when any income from the film or programme is received by the company.

1179DX

(1) This section applies for the purposes of section 1179BB as that section applies in relation to a film or television programme.

(2) Expenditure counts towards the costs of the film or programme if it is expenditure on—

(a) production activities in connection with the film or programme, or

(b) activities with a view to exploiting the film or programme.

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

(4) Receipts count towards the income from the film or programme if they are receipts in connection with the making or exploitation of the film or programme, including—

(a) receipts from the sale of the film or programme or rights in it,

(b) royalties or other payments for use of the film or programme, or aspects of it (for example, characters or music),

(d) receipts by way of a profit share agreement.

1179DY

(1) A reference to an accounting period, in relation to a film or television programme, is a reference to an accounting period of the production company for the film or programme.

(2) A reference to the “completion period”, in relation to a film or television programme, is a reference to the accounting period in which—

(a) the film or programme is completed (see section 1179EB), or

(b) the production company abandons production activities in relation to the film or programme.

(3) The production company for a film or television programme must, in its company tax return for the completion period, state whichever of those has occurred.

(4) A reference to a “pre-completion period”, in relation to a film or television programme, is a reference to any accounting period before the completion period in relation to that film or programme.

(5) In this section, “production company” includes a company that is no longer the production company for the film or television programme but is still carrying on the separate production trade in relation to it.

Miscellaneous

1179DZ

(1) Subsection (2) applies if, for an accounting period, a production company is entitled to, and claims, an audiovisual expenditure credit—

(a) in respect of a film on the basis that it is an animation, or

(b) in respect of a television programme on the basis that it is an animation or a children’s programme.

(2) The production company may not, for any subsequent accounting period, claim an audiovisual expenditure credit in respect of the film or programme on the basis that it is—

(a) a qualifying film other than an animation, or

(b) a qualifying television programme other than an animation or a children’s programme.

(3) Subsection (2) ceases to apply if the company amends its company tax return for the accounting period referred to in subsection (1) to withdraw the claim for expenditure credit for that period.

(4) An amendment may be made for that purpose despite any limitation on the time within which the return could normally be amended.

1179E

(1) The same production may be a qualifying film in one accounting period and a qualifying television programme in a subsequent accounting period, or vice versa.

(2) Such a change does not interrupt the application of this Part in relation to the film or programme.

(3) Section 1179DC (2) does not apply to a failure to meet the theatrical release condition in an accounting period if, in that period, the film was a qualifying television programme.

(4) Section 1179DH (2) does not apply to a failure to meet the broadcast condition in an accounting period if, in that period, the television programme was a qualifying film.

(5) A certificate under Schedule 1 to the Films Act 1985 has effect for the purposes of this Part as it may apply to the certified film as a television programme.

(6) A certificate under section 1179DM has effect for the purposes of this Part as it may apply to the certified television programme as a film.

1179EA

(1) “Production activities”, in relation to a film or television programme, means the activities involved in development, pre-production, principal photography and post-production of the film or programme.

(2) “Principal photography”, in relation to a film or television programme, includes the generation of images by a computer for inclusion in the film or programme.

(3) A film or television programme is an “animation” if (and only if)—

(a) the imagery of the completed film or programme includes animation, and

(b) the core expenditure on the completed animation constitutes at least 51% of the total core expenditure on the completed film or programme.

1179EB

(1) A film is “completed” when it is first in a form in which it can reasonably be regarded as ready for copies of it to be made and distributed for presentation to the general public.

(2) A television programme is “completed” when it is first in a form in which it can reasonably be regarded as ready for broadcast to the general public.

Chapter 5 — Video games

General

1179F

(1) For the purposes of this Part—

(a) a qualifying video game (see section 1179FA) is a qualifying production, and

(b) the development company for a qualifying video game (see section 1179FI) is the qualifying company for that video game.

(2) The following provisions of this Chapter apply for the purposes of this Part in relation to video games.

(3) Expenditure credit under Chapter 3 is called “video game expenditure credit” when the entitlement to it arises in respect of a video game.

Qualifying video games

1179FA

(1) A video game is a qualifying video game if—

(a) it is not an excluded game (see subsection (2)),

(b) it meets the intended supply condition (see section 1179FB),

(d) it meets the UK expenditure condition (see section 1179FH).

(2) A video game is an excluded game if it is produced for—

(a) advertising or promotional purposes, or

(b) the purposes of gambling, within the meaning of the Gambling Act 2005.

1179FB

(1) A video game meets the intended supply condition if it is intended for supply to the general public.

(2) If the video game does not meet that condition in an accounting period after the opt-in period, it cannot meet it in any subsequent accounting period.

British certification condition

1179FC

(1) In this section, references to a certificate are to a certificate under section 1179FF.

(2) A video game meets the British certification condition in a pre-completion period (see section 1179FQ) if the production company’s company tax return for the period is accompanied by a valid interim certificate.

(3) A video game meets the British certification condition in the completion period (see section 1179FQ) and any subsequent accounting period if—

(a) the production company’s company tax return for the completion period is accompanied by a valid final certificate, or

(b) the production company has abandoned production activities in relation to the video game and the production company’s company tax return for the completion period is accompanied by a valid interim certificate.

(4) Subsections (2) and (3) are subject to subsections (5) and (6).

(5) If a video game does not meet the British certification condition in the completion period, it is no longer to be regarded as having done so (nor, therefore, as being a qualifying video game) in any pre-completion period.

(6) If a certificate is revoked after the production company’s company tax return for a period is submitted, the video game in question is no longer to be regarded as having met the British certification condition (nor, therefore, as being a qualifying video game) in that period in reliance on that certificate.

(7) Subsection (6) does not apply to the extent that a direction under section 1179FF provides that the certificate is to be treated as having effect.

(8) For the purposes of this section, a certificate is valid if it has effect on the day on which the production company’s company tax return is submitted.

1179FD

(1) The Secretary of State, with the approval of the Treasury, may by regulations specify conditions which must be met by a video game before it may be certified as a British video game.

(2) Such regulations may—

(a) specify different conditions in relation to different descriptions of video game;

(b) provide that certain descriptions of video game may not be certified as a British video game;

(c) enable the Secretary of State to direct that any provision made by virtue of paragraph (b) does not apply to a video game that meets certain conditions.

1179FE

(1) The development company for a video game may apply to the Secretary of State for a certificate under section 1179FF in relation to the programme.

(2) An application may be for an interim certificate or a final certificate.

(3) An interim certificate is a certificate that—

(a) is granted before the video game is completed (see section 1179FS), and

(b) states that the video game, if completed in accordance with the proposals set out in the application, will be a British video game.

(4) A final certificate is a certificate that—

(a) is granted after the video game is completed, and

(b) states that the video game is a British video game.

(5) The Secretary of State may require an applicant to provide documents or information to assist the Secretary of State in determining the application.

(6) The Secretary of State may require information provided for the purposes of an application to be accompanied by a statutory declaration, made by the person providing it, as to the truth of the information.

(7) The Secretary of State may by regulations make provision supplementing this section, including—

(a) provision about the form of applications,

(b) provision about the particulars and evidence necessary for satisfying the Secretary of State that a video game meets any conditions that apply by virtue of section 1179FD, and

(c) provision that any statutory declaration which is required by subsection (6) to be made by any person may be made on the person’s behalf by such person as is specified in the regulations.

1179FF

(1) If—

(a) an application is made in accordance with section 1179FE, and

(b) the Secretary of State is satisfied that the video game concerned meets any conditions that apply by virtue of section 1179FD,

the Secretary of State must certify the video game accordingly.

(2) An interim certificate—

(a) may be given subject to conditions, and (unless the Secretary of State directs otherwise) is of no effect if the conditions are not met, and

(b) may be expressed to expire after a specified period, and (unless the Secretary of State directs otherwise) ceases to have effect at the end of that period.

(3) If it appears to the Secretary of State that a video game certified under this section ought not to have been certified, the Secretary of State may revoke the certificate.

(4) Unless the Secretary of State directs otherwise, a certificate that is revoked is treated as never having had effect.

1179FG

Section 1179DN (disapplication of section 18, and application of section 19, of the Commissioners for Revenue and Customs Act 2005) has effect in relation to the Secretary of State’s functions under sections 1179FD to 1179FF as it has effect in relation to the Secretary of State’s functions under sections 1179DK to 1179DM.

UK expenditure condition

1179FH

(1) A video game meets the UK expenditure condition in a pre-completion period (see section 1179FQ) if—

(a) the development company’s company tax return for the period states—

(i) the total amount of core expenditure that is expected to be incurred in relation to the video game, and

(ii) the amount of that expenditure that is expected to be UK expenditure, and

(b) the second of those amounts is at least 10% of the first.

(2) A video game meets the UK expenditure condition in the completion period (see section 1179FQ) and any subsequent accounting period if—

(a) the development company’s company tax return for the completion period states—

(i) the total amount of core expenditure that has been incurred in relation to the video game, and

(ii) the amount of that expenditure that is UK expenditure, and

(b) the second of those amounts is at least 10% of the first.

(3) Subsection (1) is subject to subsections (4) and (5).

(4) If a video game does not meet the UK expenditure condition in a pre-completion period, it is no longer to be regarded as having done so (nor, therefore, as being a qualifying video game) in any previous accounting period by virtue of subsection (1) as it applies to that previous period.

(5) If a video game does not meet the UK expenditure condition in the completion period, it is no longer to be regarded as having done so (nor, therefore, as being a qualifying video game) in any pre-completion period.

(6) References in this section to core expenditure are to core expenditure incurred by the development company.

(7) The Treasury may by regulations amend the percentage specified in subsection (1) or (2).

Development companies

1179FI

(1) A company is the development company for a video game if—

(a) it is responsible for designing, producing and testing the video game,

(b) it is actively engaged in planning and decision-making during the design, production and testing of the video game,

(d) it is more directly engaged in the matters described in paragraphs (a) to (c), taken as a whole, than any other company that satisfies those paragraphs.

(2) Activities carried on in partnership are to be ignored in determining whether a company is the development company for a video game.

Qualifying expenditure and rate of credit

1179FJ

Expenditure incurred by the development company for a video game counts as “relevant production expenditure” for the purposes of section 1179CA (2) if—

(a) it is core expenditure in relation to that video game (see section 1179FK), and

(b) it is not excluded expenditure (see sections 1179FL and 1179FM).

1179FK

(1) Expenditure is “core expenditure” in relation to a video game if it is expenditure on designing, producing or testing the video game.

(2) But core expenditure does not include expenditure on—

(a) designing the initial concept for a video game, or

(b) debugging, or carrying out maintenance in connection with, a completed video game.

1179FL

(1) Expenditure is excluded expenditure to the extent that the development company would, in respect of the expenditure, be able to claim—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) relief under Part 13 (relief in respect of expenditure on research and development).

(2) Expenditure is excluded expenditure for an accounting period to the extent that it is not paid before the end of the period of four months beginning with the first day after the final day of the accounting period.

1179FM

(1) Expenditure is excluded expenditure to the extent that it represents connected party profit, unless subsection (3) applies.

(2) For the purposes of subsection (1), expenditure represents connected party profit—

(a) if it is a payment to a person (“C”) in exchange for something supplied by that person,

(b) if the development company is connected with C, and

(3) This subsection applies if the amount of the payment is no more than would have been the case had the transaction been entered into at arm’s length.

(4) A transaction would have been entered into “at arm’s length” if it made “the arm’s length provision” within the meaning of Part 4 of TIOPA 2010 (and for this purpose any limitation on the application of that Part is to be disregarded).

(5) Subsections (6) and (7) apply if—

(a) the supply by C to the development company is one of a sequence of transactions in which the thing supplied has been supplied by one person to another, and

(b) either—

(i) each transacting party in the sequence is connected to at least one other transacting party in the sequence, or

(ii) each transaction in the sequence is entered into in furtherance of a single scheme or arrangement (of whatever kind, and whether or not legally enforceable).

(6) The reference to C in subsection (2)(c) is to be read as a reference to the supplier in the first transaction in the sequence.

(7) The reference to the transaction in subsection (3) is to be read as including each transaction in the sequence.

(8) In this section, “payment” includes any transfer of value.

1179FN

(1) In relation to a qualifying video game, the relevant percentage for the purposes of step 5 in section 1179CA (1) is 34%.

(2) The Treasury may by regulations replace the percentage for the time being specified in subsection (1) with a different percentage.

Accounting for the separate trade

1179FO

For the purposes of section 1179B, the development company for a video game is treated as beginning the separate production trade in respect of the video game—

(a) when the design of the video game begins,

(b) if earlier, when any income from the video game is received by the company.

1179FP

(1) This section applies for the purposes of section 1179BB as that section applies in relation to a video game.

(2) Expenditure counts towards the costs of the video game if it is expenditure on—

(a) development activities in connection with the video game, or

(b) activities with a view to exploiting the video game.

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

(4) Receipts count towards the income from the video game if they are receipts in connection with the production or exploitation of the video game, including—

(a) receipts from the sale of the video game or rights in it,

(b) royalties or other payments for use of the video game, or aspects of it (for example, characters or music),

(d) receipts by way of a profit share agreement.

1179FQ

(1) A reference to an accounting period, in relation to a video game, is a reference to an accounting period of the development company for the video game.

(2) A reference to the “completion period”, in relation to a video game, is a reference to the accounting period in which—

(a) the video game is completed (see section 1179FS), or

(b) the development company abandons development activities in relation to the video game.

(3) The development company for a video game must, in its company tax return for the completion period, state whichever of those has occurred.

(4) A reference to a “pre-completion period”, in relation to a video game, is a reference to any accounting period before the completion period in relation to that video game.

(5) In this section, “development company” includes a company that is no longer the development company for the video game but is still carrying on the separate production trade in relation to it.

Miscellaneous

1179FR

“Development activities”, in relation to a video game, means the activities involved in designing, producing and testing the video game.

1179FS

A video game is “completed” when it is first in a form in which it can reasonably be regarded as ready for copies of it to be made and made available to the general public.

Companies in insolvency

1217KD

(1) A company may not make a claim under section 1217H or section 1217K at a time when it is in administration or liquidation.

(2) For the purposes of this section, a company is in administration if—

(a) it is in administration under Part 2 of the Insolvency Act 1986 or Part 3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.

(3) For the purposes of this section, a company is in liquidation if—

(a) it is in liquidation within the meaning of section 247 of that Act or Article 6 of that Order, or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.

Companies in insolvency

1217RKA

(1) A company may not make a claim under section 1217RD or section 1217RG at a time when it is in administration or liquidation.

(2) For the purposes of this section, a company is in administration if—

(a) it is in administration under Part 2 of the Insolvency Act 1986 or Part 3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.

(3) For the purposes of this section, a company is in liquidation if—

(a) it is in liquidation within the meaning of section 247 of that Act or Article 6 of that Order, or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.

Companies in insolvency

1218ZCLA

(1) A company may not make a claim under section 1218ZCE or section 1218ZCH at a time when it is in administration or liquidation.

(2) For the purposes of this section, a company is in administration if—

(a) it is in administration under Part 2 of the Insolvency Act 1986 or Part 3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.

(3) For the purposes of this section, a company is in liquidation if—

(a) it is in liquidation within the meaning of section 247 of that Act or Article 6 of that Order, or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.

Overview of Chapter

Cases involving host contract

Overview of Part

Exclusion where return otherwise taxable

Excluded shares

Introduction to Chapter

Exclusion of interest where failure to make return

Transfers involving other taxes

Restrictions on debits: pre-FA 2019 relevant assets

The partial restrictions on debits

Chapter 1A — R&D expenditure credit

Introductory

1042A

(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.

Entitlement and claims

1042B

(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.

1042C

(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).

Qualifying expenditure

1042D

(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),

(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

(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

(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.

Rate of credit

1042G

(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.

Treatment of credit: main provisions

1042H

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.

1042I

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 1The amount of the credit is to be applied in discharging any liability of the company to pay corporation tax for the accounting period.

Step 2If there is a notional tax deduction (see section 1042K), it is to be applied to any amount remaining after step 1.

Step 3If 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 4Any 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 5If 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 6Any 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, orunder 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 7Any 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

(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).

Notional tax deduction

1042K

(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.

1042L

(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.

1042M

(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).

Intra-group surrenders

1042N

(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 1Select an overlapping AP.

Step 2Calculate 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 3Calculate the proportion of the surrender AP that overlaps with the overlapping AP, and apply that proportion to the surrendered amount.

Step 4The 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 5Select another overlapping AP, if there is one, and repeat steps 2 to 4.

Step 6If 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.

Basic life assurance and general annuity businesses

1042O

(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.

1045ZA

(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.

1053A

(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.

1062A

An insurance company that carries on life assurance business in an accounting period is not to be treated for the purposes of this Chapter as a small or medium-sized enterprise in relation to that period.

Introductory

1112A

(1) This Chapter limits the entitlements given by Chapters 1A and 2.

(2) Sections 1112B to 1112E provide for the amount of R&D expenditure credit or R&D tax credit payable to a company to be capped by reference to certain liabilities of the company in connection with PAYE and national insurance, except in certain cases.

(3) Sections 1112F and 1112G provide that payment of an R&D expenditure credit, and relief under Chapter 2, are available only to companies that are going concerns.

(4) Section 1112H provides that an R&D expenditure credit or R&D tax credit does not have to be paid if a tax enquiry into the company is open or the company has outstanding PAYE or national insurance liabilities.

(5) Section 1112I provides for transactions aimed at obtaining or increasing an entitlement under Chapter 1A or 2 not to succeed in doing so.

(6) Section 1112J contains provision about the amount of relief to which certain Northern Ireland companies are entitled under Chapter 2.

PAYE and NIC liabilities

1112B

(1) This section determines, for the purposes of sections 1042I and 1058(1), the amount of the cap by reference to a company’s PAYE and NIC liabilities for an accounting period.

But see section 1112E (which provides for there to be no cap in certain cases).

(2) The amount of the cap is the sum of—

(a) £20,000, and

(b) the amount produced by multiplying by three (“the multiplier”) the amount of the company’s relevant PAYE and NIC liabilities for payment periods ending in the accounting period (see section 1112C).

(3) If the accounting period is less than 12 months, the amount specified in subsection (2)(a) is to be proportionately reduced.

(4) If the company claims relief under both Chapters 1A and 2 for the period, the amount of the cap for the purposes of section 1042I is to be reduced by the amount of any R&D tax credit obtained by the company under Chapter 2.

(5) The Treasury may by regulations—

(a) replace the amount for the time being specified in subsection (2)(a) with a different amount;

(b) replace the multiplier for the time being specified in subsection (2)(b) with a different multiplier.

1112C

(1) This section determines the amount of a company’s relevant PAYE and NIC liabilities for a payment period for the purposes of section 1112B.

(2) The amount is to be calculated as follows.

Step 1Take the total amount of the company’s PAYE and NIC liabilities for the payment period (see section 1112D).

Step 2Add any amount produced by the application of subsection (4) or (6) to the company as company A.

Step 3Deduct any amount produced by the application of subsection (4) or (6) to the company as company B.

(3) An amount is produced by subsection (4) where—

(a) two companies (“company A” and “company B”) are connected,

(b) company A incurs expenditure in the payment period on externally provided workers (see sections 1127 and 1128), and

(4) The amount produced is the sum of the amounts given, in relation to each worker in respect of whom subsection (3)(c) is satisfied, by—

$$X×YZ$where—X is the amount of expenditure that—has been incurred on staffing costs by company B in providing the worker for company A, andforms part of the total amount of company B’s PAYE and NIC liabilities for the payment period (see section 1112D),Y is the amount of company A’s expenditure on the externally provided worker that has been taken into account in calculating the amount of company A’s qualifying expenditure for the payment period, andZ is the total amount of company A’s qualifying expenditure on the externally provided worker (see section 1127) for the payment period.$

(5) Subsection (6) produces an amount where—

(a) two companies (“company A” and “company B”) are connected,

(b) company A incurs qualifying contractor expenditure in the payment period, and

(c) company B incurs staffing costs in the payment period in undertaking on behalf of company A any of the research and development to which that expenditure is attributable.

(6) That amount is such amount of those staffing costs as forms part of the total amount of company B’s PAYE and NIC liabilities for the payment period (see section 1112D).

(7) In this section as it applies for the purposes of section 1042I—

“qualifying expenditure” (except in the expression “qualifying expenditure on the externally provided worker”) means expenditure that is qualifying Chapter 1A expenditure by virtue of section 1042D, 1042E or 1042F;

“qualifying contractor expenditure” means expenditure that is qualifying Chapter 1A expenditure by virtue of—section 1042E, orsection 1042F as it applies by reference to section 1042E.

(8) In this section as it applies for the purposes of section 1058(1)—

“qualifying expenditure” (except in the expression “qualifying expenditure on the externally provided worker”) means qualifying Chapter 2 expenditure (see section 1051);

“qualifying contractor expenditure” means qualifying expenditure that is qualifying Chapter 2 expenditure by virtue of—section 1053, orsection 1053A as it applies by reference to section 1053.

1112D

(1) For the purposes of section 1112C, the total amount of a company’s PAYE and NIC liabilities for a payment period is the sum of amount A and amount B.

(2) Amount A is the total amount of income tax for which the company is required to account to an officer of Revenue and Customs under PAYE regulations for the period.

(3) In calculating amount A, any deduction the company is authorised to make in respect of child tax credit or working tax credit is to be disregarded.

(4) Amount B is the total amount of Class 1 national insurance contributions for which the company is required to account to an officer of Revenue and Customs for the accounting period.

(5) In calculating amount B, any deduction the company is authorised to make in respect of any of the following is to be disregarded—

(a) statutory maternity pay,

(b) statutory adoption pay,

(d) statutory shared parental pay,

(e) statutory parental bereavement pay;

(f) child tax credit, or

(g) working tax credit.

(6) Subsection (7) applies if—

(a) in determining under section 1112C the amount of a company’s relevant PAYE and NIC liabilities for a payment period, it is necessary to determine the total amount of another company’s PAYE and NIC liabilities for that period, and

(b) that period falls within, but is shorter than, a payment period of that other company.

(7) The amount produced by subsection (1) in its application to that other company is to be proportionately reduced.

1112E

(1) There is no cap by reference to a company’s PAYE and NIC liabilities for an accounting period if the company meets conditions A and B.

(2) A company meets condition A for an accounting period if, during the period, the company is engaged in—

(a) taking, or preparing to take, steps in order that relevant intellectual property will be created by it,

(b) creating relevant intellectual property, or

(3) For the purposes of subsection (2)—

(a) a company is only engaged in an activity mentioned in paragraph (a), (b) or (c) of subsection (2) if the activity is wholly or mainly undertaken by employees of the company;

(b) intellectual property is “relevant” intellectual property in relation to a company if the whole or the greater part (in terms of value) of it is created by the company;

(c) intellectual property is created by a company if it is created in circumstances in which the right to exploit it vests in the company (whether alone or jointly with others).

(4) For the purposes of this section—

“intellectual property” means—any patent, trade mark, registered design, copyright, design right or plant breeder’s right,any rights under the law of a country or territory outside the United Kingdom which correspond or are similar to those falling within paragraph (a), orany information or technique not protected by a right within paragraph (a) or (b) but having industrial, commercial or other economic value;

“management activity”, in relation to intellectual property, means formulating plans and making decisions in relation to the development or exploitation of the intellectual property.

(5) A company meets condition B for an accounting period if the amount (if any) given by subsection (6) does not exceed 15% of the company’s qualifying expenditure for the period.

(6) The amount given by this subsection is the sum of the following incurred by the company in the period—

(a) qualifying expenditure on externally provided workers (see section 1127), where the company, the staff provider and (if different) the staff controller (or staff controllers)—

(i) are all connected, or

(ii) have jointly elected (under section 1130) that section 1129 is to apply to them as if they were all connected;

(b) qualifying contractor expenditure, where the company and the contractor—

(i) are connected, or

(ii) have jointly elected (under section 1135) that section 1134 is to apply to them as if they were connected.

(7) In subsection (6)(b), “qualifying contractor expenditure” has whichever of the meanings given by 1112C (7) corresponds to the purpose for which this section is being applied.

(8) The Treasury may by regulations replace the percentage for the time being specified in subsection (5) with a different percentage.

Going concerns

1112F

(1) Subsection (2) applies if a company makes a claim under section 1042C (claims for R&D expenditure credit) at a time when it is not a going concern.

(2) No amount is to be paid to the company at step 7 in section 1042I as a result of the claim.

(3) Subsection (2) ceases to apply (and the company accordingly becomes entitled to be paid) if the company becomes a going concern on or before the last day on which it would be entitled to amend the claim in accordance with paragraph 83E of Schedule 18 to FA 1998.

(4) A company may not make—

(a) a claim under section 1044 (R&D relief by way of additional deduction),

(b) an election under section 1045 (R&D relief by way of deemed trading loss), or

at a time when it is not a going concern.

(5) If a company ceases to be a going concern after making a claim under section 1054, it is treated as if it had not made the claim (and accordingly there is treated as having been no payment of R&D tax credit to carry interest under section 826 of ICTA).

(6) Subsection (5) does not apply so far as the claim relates to an amount that was paid or applied before the company ceased to be a going concern.

1112G

(1) For the purposes of section 1112F, a company is a going concern if—

(a) its latest published accounts were prepared on a going concern basis, and

(b) nothing in those accounts indicates that they were prepared on that basis only because of an entitlement or expected entitlement to a credit or relief under this Part.

(2) But a company is not a going concern if it is in administration or liquidation.

(3) For the purposes of this section, a company is in administration if—

(a) it is in administration under Part 2 of the Insolvency Act 1986 or Part 3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.

(4) For the purposes of this section, a company is in liquidation if—

(a) it is in liquidation within the meaning of section 247 of that Act or Article 6 of that Order, or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.

(5) If—

(a) a company transfers its trade and research and development to another company that is a member of the same group, and

(b) only by reason of that transfer, the company’s accounts for the period of account in which the transfer took place are not prepared on a going concern basis,

the accounts are to be treated for the purposes of this section as if they were prepared on a going concern basis.

(6) Section 436(2) of the Companies Act 2006 (meaning of “publication” of documents) has effect for the purposes of this section.

Outstanding tax matters

1112H

(1) This section applies in relation to an amount that a company would, but for this section, be entitled to be paid—

(a) at step 7 in section 1042I (payment of R&D expenditure credit not applied for other purposes), or

(b) under section 1054 (payment of R&D tax credit).

(2) If the company’s tax return for the accounting period in question is enquired into by an officer of Revenue or Customs—

(a) the amount does not have to be paid to the company, but

(b) an officer of Revenue and Customs may make a payment on a provisional basis of such amount as the officer thinks fit.

(3) If the company has outstanding PAYE or NIC liabilities for the accounting period in question, the amount does not have to be paid to the company.

(4) For the purposes of subsection (3), a company has outstanding PAYE or NIC liabilities for an accounting period if it has not paid to an officer of Revenue and Customs any amount that it is required to pay—

(a) under PAYE regulations, or

(b) in respect of Class 1 national insurance contributions,

for payment periods ending in the accounting period.

Artificially inflated claims

1112I

(1) To the extent that a transaction is attributable to arrangements entered into for a disqualifying purpose, it is to be disregarded in ascertaining a company’s entitlement to relief under this Part.

(2) Arrangements are entered into for a disqualifying purpose if their main purpose, or one of their main purposes, is to enable a company to obtain relief under this Part—

(a) to which it would not otherwise be entitled, or

(b) of greater amount than that to which it would otherwise be entitled.

Northern Ireland companies

1112J

(1) This section applies for the purpose of determining the entitlement of a Northern Ireland company to relief under Chapter 2.

(2) A Northern Ireland company is entitled to additional relief under Chapter 2 only to the extent that the additional relief would be exempted from notification under Article 108(3) of the TFEU by a de minimis aid regulation listed in paragraph 3.4 of Annex 5 to the Windsor Framework (as amended or replaced from time to time).

(3) In subsection (2), “additional relief” means the difference between the value of the relief claimed by the company under Chapter 2 in respect of expenditure and the value of the relief that could have been obtained by the company under Chapter 1A in respect of that expenditure.

(4) This section does not apply to a company in relation to an accounting period if the company—

(a) has not, at any time during the accounting period, carried on a trade involving—

(i) trade in goods, or

(ii) the generation, transmission, distribution, supply, wholesale trade or cross-border exchange of electricity, and

(b) has notified an officer of Revenue and Customs in writing that it wishes to rely on the exception in this subsection.

(5) In this section—

“Northern Ireland company” means a company whose registered office is in Northern Ireland;

“TFEU” means the Treaty on the Functioning of the European Union as it has effect by virtue of Article 10 of the Windsor Framework;

“Windsor Framework” means the part of the EU withdrawal agreement known as the Windsor Framework by virtue of Joint Declaration No. 1/2023 of 24th March 2023 made by the European Union and the United Kingdom in the Joint Committee established by the EU withdrawal agreement.

“R&D claim”

1132A

(1) This section determines what are “qualifying earnings” in relation to an externally provided worker for the purposes of this Part.

(2) The worker’s earnings are qualifying earnings if either—

(a) the staff controller, or

(b) the company in relation to which the worker is an externally provided worker,

is, in respect of any part of those earnings, required to account to an officer of Revenue and Customs both for income tax under PAYE regulations and for Class 1 national insurance contributions.

(3) If subsection (2) does not apply, the worker’s earnings are qualifying earnings if and to the extent that they are attributable to relevant research and development that is undertaken outside the United Kingdom and to which section 1138A applies.

(4) In this section, “the worker’s earnings” means the worker’s earnings under the contract mentioned in section 1128(7).

1138A

(1) This section applies to research and development undertaken outside the United Kingdom if—

(a) the research and development is undertaken in the circumstances described in subsection (2), or

(b) the research and development is undertaken, or contracted out, by a company whose registered office is in Northern Ireland.

(2) The circumstances are that there are conditions necessary for the purposes of the research and development—

(a) that are not present in the United Kingdom,

(b) that are present in the location in which the research and development is undertaken, and

(3) In subsection (2) “conditions”—

(a) includes—

(i) geographical, environmental or social conditions;

(ii) legal or regulatory requirements as a result of which the research and development may not be undertaken in the United Kingdom, but

(b) does not include conditions so far as relating to—

(i) the cost of the research and development;

(ii) the availability of workers to carry out the research and development.

(4) The Treasury may by regulations make provision specifying things that are not conditions for the purposes of subsection (2).

(5) Subsection (1)(b) does not apply in relation to a company in respect of an accounting period if the company—

(a) has not, at any time during the accounting period, carried on a trade involving—

(i) trade in goods, or

(ii) the generation, transmission, distribution, supply, wholesale trade or cross-border exchange of electricity, and

(b) has notified an officer of Revenue and Customs in writing that it wishes to rely on the exception in section 1112J(4) (restriction of Chapter 2 relief for Northern Ireland companies).

1138B

For the purposes of this Part in its application to an accounting period, a company’s expenditure is “attributable to an exempt foreign permanent establishment” if—

(a) an election by the company under section 18A applies to the period, and

(b) the expenditure is brought into account in calculating a relevant profits amount or a relevant losses amount for the purposes of that section as it applies in relation to the period.

1140A

For the purposes of this Part, a company is in the same group as another company if those companies are in the same group for the purposes of Part 5 of CTA 2010.

Claim for additional deduction

Calculation of profits or losses of separate theatrical trade

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

1179DJA

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