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Finance (No. 4) Bill


Finance (No. 4) Bill
Schedule 3 — Relief for expenditure on R&D

178

 

      (6)  

In this paragraph—

“relevant accounting period” has the meaning given by section

357EB(3) of CTA 2010,

“relevant IP profits”, in relation to a trade of a company for an

accounting period, has the same meaning in this paragraph as in Part

5

8A of that Act, and

“set-off amount”, in relation to a trade of a company for an accounting

period, is to be read in accordance with Chapter 5 of that Act.

Schedule 3

Section 20

 

Relief for expenditure on R&D

10

Introductory

1          

Part 13 of CTA 2009 (additional relief for expenditure on research and

development) is amended as follows.

Amount of relief for expenditure on R&D by small or medium-sized enterprises (“SMEs”)

2     (1)  

Chapter 2 (relief for SMEs: cost of R&D incurred by SME) is amended as

15

follows.

      (2)  

In section 1044 (additional deduction in calculating profits of trade), in

subsection (8), for “100%” substitute “125%”.

      (3)  

In section 1045 (alternative treatment for pre-trading expenditure: deemed

trading loss), in subsection (7), for “200%” substitute “225%”.

20

      (4)  

In section 1055 (tax credit: meaning of “Chapter 2 surrenderable loss”), in

subsection (2)(b), for “200%” substitute “225%”.

      (5)  

In section 1058 (amount of tax credit), in subsection (1)(a), for “12.5%”

substitute “11%”.

Removal of R&D threshold

25

3     (1)  

Chapter 2 (relief for SMEs: cost of R&D incurred by SME) is amended as

follows.

      (2)  

In section 1043 (overview of Chapter), in subsection (3), omit paragraph (e)

(but not the “and” after it).

      (3)  

In section 1044 (additional deduction in calculating profits of trade), omit

30

subsection (3).

      (4)  

In section 1045 (alternative treatment for pre-trading expenditure: deemed

trading loss)—

(a)   

in subsection (1), omit “, B”, and

(b)   

omit subsection (3).

35

      (5)  

Omit section 1050 (R&D threshold).

4     (1)  

Chapter 3 (relief for SMEs: R&D sub-contracted to SME) is amended as

follows.

 
 

Finance (No. 4) Bill
Schedule 3 — Relief for expenditure on R&D

179

 

      (2)  

In section 1063 (additional deduction in calculating profits of trade)—

(a)   

in subsection (1), omit “, B”, and

(b)   

omit subsection (3).

      (3)  

Omit section 1064 (R&D threshold).

5     (1)  

Chapter 4 (relief for SMEs: subsidised and capped expenditure on R&D) is

5

amended as follows.

      (2)  

In section 1068 (additional deduction in calculating profits of trade)—

(a)   

in subsection (1), omit “, B”, and

(b)   

omit subsection (3).

      (3)  

Omit section 1069 (R&D threshold).

10

6     (1)  

Chapter 5 (relief for large companies) is amended as follows.

      (2)  

In section 1074 (additional deduction in calculating profits of trade)—

(a)   

in subsection (1), omit “, B”, and

(b)   

omit subsection (3).

      (3)  

Omit section 1075 (R&D threshold).

15

7     (1)  

Chapter 7 (relief for SMEs and large companies: vaccine research etc) is

amended as follows.

      (2)  

In section 1085 (overview of Chapter), in subsection (5), omit paragraph (c).

      (3)  

In section 1087 (deduction in calculating profits of trade)—

(a)   

in subsection (1), omit “, B”, and

20

(b)   

omit subsection (3).

      (4)  

In section 1092 (SMEs: deemed trading loss for pre-trading expenditure),

omit subsection (3).

      (5)  

Omit section 1097 (R&D threshold).

8          

In consequence of the amendments made by paragraphs 3 to 7, in Schedule

25

4 to CTA 2009 omit each of the entries for “R&D threshold”.

Company not a going concern when in administration or liquidation

9          

Chapter 2 (relief for SMEs: cost of R&D incurred by SME) is amended as

follows.

10    (1)  

Section 1046 (relief only available where company is going concern) is

30

amended as follows.

      (2)  

At the end of subsection (2) insert—

   

“This is subject to subsection (2A).”

      (3)  

After subsection (2) insert—

“(2A)   

A company is not a going concern at any time if it is in administration

35

or liquidation at that time.

(2B)   

For the purposes of this section a company is in administration if—

 
 

Finance (No. 4) Bill
Schedule 3 — Relief for expenditure on R&D

180

 

(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

5

company.

(2C)   

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

10

territory outside the United Kingdom exists in relation to the

company.”

11    (1)  

Section 1057 (tax credit only available where company is going concern) is

amended as follows.

      (2)  

At the end of subsection (4) insert—

15

   

“This is subject to subsection (4A).”

      (3)  

After subsection (4) insert—

“(4A)   

A company is not a going concern at any time if it is in administration

or liquidation at that time.

(4B)   

For the purposes of this section a company is in administration if—

20

(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

25

company.

(4C)   

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

30

territory outside the United Kingdom exists in relation to the

company.”

12         

Chapter 7 (relief for SMEs and large companies: vaccine research etc) is

amended as follows.

13    (1)  

Section 1094 (relief only available to SME where company is going concern)

35

is amended as follows.

      (2)  

At the end of subsection (2) insert—

   

“This is subject to subsection (2A).”

      (3)  

After subsection (2) insert—

“(2A)   

A company is not a going concern at any time if it is in administration

40

or liquidation at that time.

(2B)   

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

45

 
 

Finance (No. 4) Bill
Schedule 3 — Relief for expenditure on R&D

181

 

(b)   

a corresponding situation under the law of a country or

territory outside the United Kingdom exists in relation to the

company.

(2C)   

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

5

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.”

14    (1)  

Section 1106 (tax credit only available where company is going concern) is

10

amended as follows.

      (2)  

At the end of subsection (4) insert—

   

“This is subject to subsection (4A).”

      (3)  

After subsection (4) insert—

“(4A)   

A company is not a going concern at any time if it is in administration

15

or liquidation at that time.

(4B)   

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

20

(b)   

a corresponding situation under the law of a country or

territory outside the United Kingdom exists in relation to the

company.

(4C)   

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

25

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.”

Removal of limit on amount of tax credit based on PAYE and NIC liabilities

30

15    (1)  

Chapter 2 (relief for SMEs: cost of R&D incurred by SME) is amended as

follows.

      (2)  

In section 1058 (amount of tax credit), in subsection (1), omit paragraph (b)

(and the “or” before it).

      (3)  

Omit section 1059 (total amount of company’s PAYE and NIC liabilities).

35

Abolition of vaccine research relief for SMEs

16    (1)  

Section 1039 (overview of Part 13) is amended as follows.

      (2)  

In subsection (6), for the words from “companies” to “companies)”

substitute “large companies”.

      (3)  

In subsection (7)—

40

(a)   

for “Chapters 2 and 7 also provide” substitute “Chapter 2 also

provides”, and

 
 

Finance (No. 4) Bill
Schedule 3 — Relief for expenditure on R&D

182

 

(b)   

in paragraph (a), omit “or 7”.

17         

In section 1042 (“relevant research and development”), in subsection (3),

omit “SMEs and”.

18         

In section 1046 (relief only available where company is going concern), in

subsection (2)(b), omit “or Chapter 7”.

5

19         

In section 1057 (tax credit only available where company is going concern),

in subsection (4)(b), omit “or Chapter 7”.

20         

Chapter 7 (relief for SMEs and large companies: vaccine research etc) is

amended as set out in paragraphs 21 to 30.

21    (1)  

Section 1085 (overview of Chapter) is amended as follows.

10

      (2)  

In subsection (1), for the words from “companies” to “companies)”

substitute “large companies”.

      (3)  

For subsection (3) substitute—

“(3)   

The relief available is a deduction under section 1087 (the amount of

which is determined under section 1091).”

15

      (4)  

Omit subsection (4).

      (5)  

For subsection (5) substitute—

“(5)   

Sections 1098 to 1102 contain provision about when a company’s

expenditure is “qualifying Chapter 7 expenditure” for the purposes

of obtaining relief and when such expenditure is “for” an accounting

20

period.”

      (6)  

Omit subsection (6).

      (7)  

In subsection (7), omit “or R&D tax credits”.

22    (1)  

Section 1087 (deduction in calculating profits of trade) is amended as

follows.

25

      (2)  

In subsection (1), for “and C” substitute “, C and D”.

      (3)  

After subsection (4) insert—

“(4A)   

Condition D is that the company is a large company throughout the

period.”

      (4)  

For subsection (7) substitute—

30

“(7)   

For the amount of the deduction see section 1091.”

      (5)  

In subsection (9)—

(a)   

in paragraph (a), omit “large”,

(b)   

omit paragraph (b), and

(c)   

in paragraph (d), for “sections 1099 and 1100” substitute “section

35

1100”.

23    (1)  

In section 1088 (large companies: declaration about effect of relief), in

subsection (1), omit “large”.

      (2)  

Accordingly, the heading of that section becomes “Declaration about effect

of relief”.

40

 
 

Finance (No. 4) Bill
Schedule 3 — Relief for expenditure on R&D

183

 

24         

Omit sections 1089 and 1090 (which relate only to SMEs).

25    (1)  

In section 1091 (large companies: amount of deduction), in subsection (1),

omit paragraph (b) (and the “and” before it).

      (2)  

Accordingly, the heading of that section becomes “Amount of deduction”.

26         

Omit sections 1092 to 1096 and 1099 (which relate only to SMEs).

5

27    (1)  

In section 1100 (large companies: qualifying expenditure “for” an accounting

period), for subsection (1) substitute—

“(1)   

A company’s qualifying Chapter 7 expenditure is “for” an

accounting period if it is allowable as a deduction in calculating for

corporation tax purposes the profits for the period of a trade carried

10

on by the company.”

      (2)  

Accordingly, the heading of that section becomes “Qualifying expenditure

“for” an accounting period”.

28         

Omit sections 1103 to 1111 (tax credits).

29    (1)  

Section 1112 (artificially inflated claims for relief or tax credit) is amended as

15

follows.

      (2)  

In subsection (1), for “the purposes mentioned in subsection (2)” substitute

“the purpose of determining for an accounting period relief to which a

company is entitled under this Chapter”.

      (3)  

Omit subsection (2).

20

      (4)  

In subsection (3)—

(a)   

at the end of paragraph (a) insert “or”, and

(b)   

omit paragraphs (c) and (d).

      (5)  

Accordingly, the heading of that section becomes “Artificially inflated

claims for relief”.

25

30         

The heading of Chapter 7 becomes “Relief for large companies: vaccine

research etc”.

31    (1)  

Chapter 8 (cap on aid for R&D) is amended as follows.

      (2)  

In section 1113 (cap on R&D aid under Chapter 2 or 7), in subsection (4)(b),

omit “SMEs and”.

30

      (3)  

In section 1115 (“the tax credits”), in subsection (1), omit “or 7”.

32         

In consequence of the amendments made by paragraphs 16 to 31—

(a)   

in Schedule 4 to CTA 2009 (index of defined expressions), omit the

entry for “Chapter 7 surrenderable loss”,

(b)   

in Schedule 1 to CTA 2010, omit paragraphs 672 to 674, and

35

(c)   

in section 43 of FA 2011, omit subsections (7) to (11).

Qualifying expenditure on externally provided workers

33         

Chapter 9 (supplementary) is amended as follows.

34    (1)  

Section 1128 (“externally provided worker”) is amended as follows.

 
 

Finance (No. 4) Bill
Schedule 3 — Relief for expenditure on R&D

184

 

      (2)  

In subsection (7), for “the staff provider” substitute “a person other than the

company (the “staff controller”)”.

      (3)  

After subsection (8) insert—

“(9)   

In sections 1129 to 1131 references to “staff controller” are to be read

in accordance with subsection (7).”

5

35    (1)  

Section 1129 (connected persons) is amended as follows.

      (2)  

In subsection (1), for paragraphs (b) and (c) substitute—

“(b)   

the company, the staff provider and (if different) the staff

controller (or staff controllers) are all connected, and

(c)   

in accordance with generally accepted accounting practice—

10

(i)   

the whole of the staff provision payment has been

brought into account in determining the staff

provider’s profit or loss for a relevant period, and

(ii)   

all of the relevant expenditure of each staff controller

has been brought into account in determining the

15

staff controller’s profit or loss for a relevant period.”

      (3)  

In subsection (2)(b), for “the staff provider’s relevant expenditure”

substitute “the aggregate of the relevant expenditure of each staff

controller”.

      (4)  

In subsection (3)—

20

(a)   

for “of the staff provider” substitute “, in relation to a staff

controller,”, and

(b)   

in paragraph (a), for “staff provider” substitute “staff controller”.

      (5)  

In subsection (4)—

(a)   

after ““Relevant period”” insert “, in relation to a person,”, and

25

(b)   

in paragraph (a), for “staff provider” substitute “person”.

      (6)  

In subsection (5)—

(a)   

for “the staff provider’s expenditure” substitute “the expenditure of

a staff controller”, and

(b)   

for “the staff provider” substitute “a staff controller”.

30

      (7)  

In subsection (7), for “staff provider” substitute “a staff controller”.

36    (1)  

Section 1130 (election for connected persons treatment) is amended as

follows.

      (2)  

For subsection (1) substitute—

“(1)   

If—

35

(a)   

a company makes a staff provision payment, and

(b)   

the company, the staff provider and (if different) the staff

controller (or staff controllers) are not all connected,

   

they may jointly elect that section 1129 is to apply to them as if they

were all connected.”

40

      (3)  

In subsection (2), for “must be made” substitute “has effect”.

37         

In section 1131 (qualifying expenditure on externally provided workers:

other cases), in subsection (1), for paragraph (b) (but not the “and” following

 
 

 
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