Finance (No. 4) Bill

Session 2010 - 12
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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
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      (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