|
| |
|
(2) | “Mixed income” means the proceeds of sale in a case where an item |
| |
falling within subsection (2) of section 357CC and an item not falling |
| |
within that subsection are sold together as, or as part of, a single unit |
| |
| |
(3) | A “mixed agreement” is an agreement providing for— |
| 5 |
(a) | one or more of the matters in paragraphs (a) to (c) of |
| |
| |
(b) | one or more of the matters in paragraphs (d) to (g) of that |
| |
| |
| 10 |
(a) | the sale of an item falling within section 357CC(2), |
| |
(b) | the grant of any right falling within paragraph (a), (b) or (c) |
| |
| |
(c) | a sale or disposal falling within section 357CC(7), |
| |
(d) | the sale of any other item, |
| 15 |
(e) | the grant of any other right, |
| |
(f) | any other sale or disposal, |
| |
(g) | the provision of any services. |
| |
(5) | So much of the income as on a just and reasonable apportionment is |
| |
properly attributable to— |
| 20 |
(a) | the sale of an item falling within section 357CC(2), |
| |
(b) | the grant of any right falling within paragraph (a), (b) or (c) |
| |
| |
(c) | a sale or disposal falling within section 357CC(7), |
| |
| is to be regarded for the purposes of this Part as relevant IP income. |
| 25 |
(6) | But where the amount of income that on such an apportionment is |
| |
properly attributable to any of the matters in paragraphs (d) to (g) of |
| |
subsection (4) is a trivial proportion of the income to which this |
| |
section applies, all of that income is to be regarded for the purposes |
| |
of this Part as relevant IP income. |
| 30 |
Calculating profits of trade |
| |
357CG | Adjustments in calculating profits of trade |
| |
(1) | This section applies for the purposes of determining the relevant IP |
| |
profits of a trade of a company for an accounting period. |
| |
(2) | In calculating the profits of the trade for the accounting period— |
| 35 |
(a) | there are to be added the amounts in subsection (3), and |
| |
(b) | there are to be deducted the amounts in subsection (4). |
| |
(3) | The amounts to be added are— |
| |
(a) | the amount of any debits which are treated as expenses of the |
| |
| 40 |
(i) | section 297 of CTA 2009 (debits in respect of loan |
| |
| |
(ii) | section 573 of CTA 2009 (debits in respect of |
| |
derivative contracts), and |
| |
|
| |
|
| |
|
(b) | the amount of any additional deduction for the accounting |
| |
period obtained by the company under Part 13 of CTA 2009 |
| |
for expenditure on research and development in relation to |
| |
| |
(4) | The amounts to be deducted are any amounts of finance income |
| 5 |
brought into account in calculating the profits of the trade for the |
| |
| |
| (For the meaning of “finance income”, see section 357CB.) |
| |
(5) | In a case where there is a shortfall in R&D expenditure in relation to |
| |
the trade for a relevant accounting period (see section 357CH), the |
| 10 |
amount of R&D expenditure brought into account in calculating the |
| |
profits of the trade for that accounting period is to be increased by |
| |
the amount mentioned in section 357CH(2). |
| |
(6) | For the purposes of subsection (5)— |
| |
“R&D expenditure” means expenditure on research and |
| 15 |
development in relation to the trade, |
| |
“relevant accounting period”, in relation to a company, |
| |
| |
(a) | the first accounting period for which— |
| |
(i) | the company is a qualifying company, and |
| 20 |
(ii) | an election under section 357A has effect in |
| |
| |
(b) | each accounting period that begins before the end of |
| |
the period of 4 years beginning with that accounting |
| |
| 25 |
“research and development” means activities, other than oil and |
| |
gas exploration and appraisal, that fall to be treated as |
| |
research and development in accordance with generally |
| |
accepted accounting practice. |
| |
357CH | Shortfall in R&D expenditure |
| 30 |
(1) | There is a shortfall in R&D expenditure in relation to a trade of a |
| |
company for a relevant accounting period if the actual R&D |
| |
expenditure of the trade for the accounting period (as adjusted under |
| |
subsections (8) to (11)) is less than 75% of the average amount of R&D |
| |
| 35 |
(2) | The amount that is to be added to the actual R&D expenditure for the |
| |
purposes of section 357CG(5) is an amount equal to the difference |
| |
| |
(a) | 75% of the average amount of R&D expenditure, and |
| |
(b) | the actual R&D expenditure, as adjusted under subsections |
| 40 |
| |
| |
(a) | the “actual R&D expenditure” of a trade of a company for an |
| |
accounting period is the amount of R&D expenditure that |
| |
(ignoring section 357CG(5)) is brought into account in |
| 45 |
calculating the profits of the trade for the accounting period, |
| |
| |
|
| |
|
| |
|
(b) | “R&D expenditure” and “relevant accounting period” have |
| |
the meaning given by section 357CG(6). |
| |
(4) | The average amount of R&D expenditure is—![equation: cross[over[char[E],char[N]],num[365.0000000000000000,"365"]]](missing.gif) |
| |
| |
E is the amount of R&D expenditure that— |
| 5 |
(a) | has been incurred by the company during the |
| |
| |
(b) | has been brought into account in calculating the |
| |
profits of the trade for any accounting period ending |
| |
before the first relevant accounting period, and |
| 10 |
N is the number of days in the relevant period. |
| |
(5) | The relevant period is the shorter of— |
| |
(a) | the period of 4 years ending immediately before the first |
| |
relevant accounting period, and |
| |
(b) | the period beginning with the day on which the company |
| 15 |
begins to carry on the trade and ending immediately before |
| |
the first relevant accounting period. |
| |
(6) | For a relevant accounting period of less than 12 months, the average |
| |
amount of R&D expenditure is proportionately reduced. |
| |
(7) | Subsections (8) to (11) apply for the purposes of determining— |
| 20 |
(a) | whether there is a shortfall in R&D expenditure for a relevant |
| |
| |
(b) | if there is such a shortfall, the amount to be added by virtue |
| |
| |
(8) | If the amount of the actual R&D expenditure for a relevant |
| 25 |
accounting period is greater than the average amount of R&D |
| |
expenditure, the difference between the two amounts is to be added |
| |
to the actual R&D expenditure for the next relevant accounting |
| |
| |
| 30 |
(a) | there is not a shortfall in R&D expenditure for a relevant |
| |
| |
(b) | in the absence of any additional amount, there would be a |
| |
shortfall in R&D expenditure for that accounting period, |
| |
| the remaining portion of the additional amount is to be added to the |
| 35 |
actual R&D expenditure for the next relevant accounting period. |
| |
(10) | For the purposes of this section— |
| |
“additional amount”, in relation to a relevant accounting |
| |
period, means any amount added to the actual R&D |
| |
expenditure for that accounting period by virtue of |
| 40 |
subsection (8), (9) or (11), and |
| |
“the remaining portion” of an additional amount is so much of |
| |
that amount as exceeds the difference between— |
| |
|
| |
|
| |
|
(a) | the actual R&D expenditure for the relevant |
| |
accounting period in the absence of the additional |
| |
| |
(b) | 75% of the average amount of R&D expenditure. |
| |
| 5 |
(a) | there is not a shortfall in R&D expenditure for a relevant |
| |
| |
(b) | there would not be a shortfall in R&D expenditure for that |
| |
accounting period in the absence of any additional amount, |
| |
| the additional amount is to be added to the actual R&D expenditure |
| 10 |
for the next relevant accounting period (in addition to any additional |
| |
amount so added by virtue of subsection (8)). |
| |
| |
357CI | Routine return figure |
| |
(1) | To determine the routine return figure in relation to a trade of a |
| 15 |
company for an accounting period— |
| |
| |
| Take the aggregate of any routine deductions made by the company |
| |
in calculating the profits of the trade for the accounting period. |
| |
| For the meaning of “routine deductions”, see sections 357CJ and |
| 20 |
| |
| |
| Multiply that amount by 0.1. |
| |
| |
| Calculate X% of the amount given by Step 2. |
| 25 |
| “X%” is the percentage given by Step 2 in section 357C(1). |
| |
| |
(a) | the company (“C”) is a member of a group, |
| |
(b) | another member of the group incurs expenses on behalf of C, |
| |
(c) | had they been incurred by C, C would have made a |
| 30 |
deduction in respect of the expenses in calculating the profits |
| |
of the trade for the accounting period, and |
| |
(d) | the deduction would have been a routine deduction, |
| |
| C is to be treated for the purposes of subsection (1) as having made |
| |
such a routine deduction. |
| 35 |
(3) | Where expenses are incurred by any member of the group on behalf |
| |
of C and any other member of the group, subsection (2) applies in |
| |
relation to so much of the amount of the expenses as on a just and |
| |
reasonable apportionment may properly be regarded as incurred on |
| |
| 40 |
| |
(1) | For the purposes of section 357CI “routine deductions” means |
| |
deductions falling within any of the Heads set out in— |
| |
(a) | subsection (2) (capital allowances), |
| |
|
| |
|
| |
|
(b) | subsection (3) (costs of premises), |
| |
(c) | subsection (4) (personnel costs), |
| |
(d) | subsection (5) (plant and machinery costs), |
| |
(e) | subsection (6) (professional services), |
| |
(f) | subsection (7) (miscellaneous services). |
| 5 |
| This is subject to section 357CK (deductions that are not routine |
| |
| |
(2) | Head 1 is any allowances under CAA 2001. |
| |
(3) | Head 2 is any deductions made by the company in respect of any |
| |
premises occupied by the company. |
| 10 |
(4) | Head 3 is any deductions made by the company in respect of— |
| |
(a) | any director or employee of the company, or |
| |
(b) | any externally provided workers. |
| |
(5) | Head 4 is any deductions made by the company in respect of any |
| |
plant or machinery used by the company. |
| 15 |
(6) | Head 5 is any deductions made by the company in respect of any of |
| |
| |
(a) | legal services, other than IP-related services; |
| |
(b) | financial services, including— |
| |
(i) | insurance services, and |
| 20 |
(ii) | valuation or actuarial services; |
| |
(c) | services provided in connection with the administration or |
| |
management of the company’s directors and employees; |
| |
(d) | any other consultancy services. |
| |
(7) | Head 6 is any deductions made by the company in respect of any of |
| 25 |
| |
(a) | the supply of water, fuel or power; |
| |
(b) | telecommunications services; |
| |
(c) | computing services, including computer software; |
| |
| 30 |
(e) | the transportation of any items; |
| |
(f) | the collection, removal and disposal of refuse. |
| |
| |
“externally provided worker” has the same meaning as in Part |
| |
13 of CTA 2009 (see section 1128 of that Act), |
| 35 |
“IP-related services” means services provided in connection |
| |
| |
(a) | any application for a right to which this Part applies, |
| |
| |
(b) | any proceedings relating to the enforcement of any |
| 40 |
| |
“premises” includes any land, |
| |
“telecommunications service” means any service that consists in |
| |
the provision of access to, and of facilities for making use of, |
| |
any telecommunication system (whether or not one provided |
| 45 |
by the person providing the service), and |
| |
|
| |
|
| |
|
“telecommunication system” means any system (including the |
| |
apparatus comprised in it) which exists for the purpose of |
| |
facilitating the transmission of communications by any |
| |
means involving the use of electrical or electro-magnetic |
| |
| 5 |
(9) | The Treasury may by order amend this section. |
| |
357CK | Deductions that are not routine deductions |
| |
(1) | For the purposes of section 357CI a deduction is not a “routine |
| |
deduction” if it falls within any of the Heads set out in— |
| |
(a) | subsection (2) (loan relationships and derivative contracts), |
| 10 |
(b) | subsection (3) (R&D expenses), |
| |
(c) | subsection (4) (capital allowances for R&D or patents), |
| |
(d) | subsection (5) (R&D-related employee share acquisitions). |
| |
(2) | Head 1 is any debits which are treated as expenses of the trade by |
| |
| 15 |
(a) | section 297 of CTA 2009 (debits in respect of loan |
| |
| |
(b) | section 573 of CTA 2009 (debits in respect of derivative |
| |
| |
| 20 |
(a) | the amount of any expenditure on research and development |
| |
in relation to the trade for which an additional deduction for |
| |
the accounting period is obtained by the company under Part |
| |
| |
(b) | the amount of that additional deduction. |
| 25 |
(4) | Head 3 is any allowances under— |
| |
(a) | Part 6 of CAA 2001 (research and development allowances), |
| |
| |
(b) | Part 8 of CAA 2001 (patent allowances). |
| |
(5) | Head 4 is the appropriate proportion of any deductions allowed |
| 30 |
under Part 12 of CTA 2009 (relief for employee share acquisitions) in |
| |
| |
(a) | shares are acquired by an employee or another person |
| |
because of the employee’s employment by the company, and |
| |
(b) | the employee is wholly or partly engaged directly and |
| 35 |
actively in relevant research and development (within the |
| |
meaning of section 1042 of CTA 2009). |
| |
(6) | In subsection (5) “the appropriate proportion”, in relation to a |
| |
deduction allowed in respect of an employee, is the proportion of the |
| |
staffing costs in respect of the employee which are attributable to |
| 40 |
relevant research and development for the purposes of Part 13 of |
| |
CTA 2009 (see section 1124 of that Act). |
| |
| “Staffing costs” has the same meaning as in that Part (see section 1123 |
| |
| |
(7) | Subsections (5) and (6) of section 1124 of CTA 2009 apply for the |
| 45 |
purposes of subsection (5)(b) as they apply for the purposes of that |
| |
| |
|
| |
|
| |
|
(8) | The Treasury may by order amend this section. |
| |
Election for small claims treatment |
| |
357CL | Companies eligible to elect for small claims treatment |
| |
(1) | A company may elect for small claims treatment for an accounting |
| |
period if condition A or B is met in relation to the accounting period. |
| 5 |
(2) | Condition A is that the aggregate of the amounts of qualifying |
| |
residual profit of each trade of the company for the accounting |
| |
period does not exceed £1,000,000. |
| |
| |
(a) | the aggregate of the amounts of qualifying residual profit of |
| 10 |
each trade of the company for the accounting period does not |
| |
exceed the relevant maximum, and |
| |
(b) | the company did not take Step 6 in section 357C(1) or |
| |
357DA(1) for the purpose of calculating the relevant IP |
| |
profits of any trade of the company for any previous |
| 15 |
accounting period beginning within the relevant 4-year |
| |
| |
(4) | In subsection (3)(b) “the relevant 4-year period” means the period of |
| |
4 years ending immediately before the accounting period mentioned |
| |
| 20 |
(5) | If the company has no associated company in the accounting period, |
| |
the relevant maximum is £3,000,000. |
| |
(6) | If the company has one or more associated companies in the |
| |
accounting period, the relevant maximum is—![equation: over[comma[string["\xa3 3"],num[0.0000000000000000,"000"],num[0.0000000000000000,"000"]],
plus[num[1.0000000000000000,"1"],char[N]]]](missing.gif) |
| |
| where N is the number of those associated companies in relation to |
| 25 |
which an election under section 357A has effect for the accounting |
| |
| |
(7) | For an accounting period of less than 12 months, the relevant |
| |
maximum is proportionately reduced. |
| |
(8) | Any amount of qualifying residual profit of a trade of the company |
| 30 |
that is not greater than nil is to be disregarded for the purposes of this |
| |
| |
(9) | Sections 25 to 30 (definition of “associated companies”) have effect |
| |
for the purposes of this section. |
| |
357CM | Small claims amount |
| 35 |
(1) | This section applies where a company elects for small claims |
| |
treatment for an accounting period. |
| |
(2) | The small claims amount in relation to each trade of the company for |
| |
the accounting period is— |
| |
(a) | if the amount in subsection (3) is lower than the small claims |
| 40 |
threshold, 75% of the qualifying residual profit of the trade |
| |
for the accounting period; |
| |
|
| |
|