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House of Lords

Session 2013 - 14 Internet Publications Other Bills before Parliament

Finance Bill

Finance Bill Schedule 15 — R&D expenditure credits Part 1 — Amendments of CTA 2009 257
104O     Amounts deducted by way of tax adjustment
(1)    This section applies if—
(a)    a company is entitled to an R&D expenditure credit for an
accounting period under this Chapter, and
(b)    the amount of the set-off amount remaining after step 1 in	5
section 104N(2) is greater than the net value of the set-off
amount.
(2)    An amount equal to the difference between—
(a)    the amount remaining after step 1 in section 104N(2), and
(b)    the net value of the set-off amount,	10
(“the step 2 amount”) is to be applied in discharging any liability of
the company to pay corporation tax for any subsequent accounting
period.
This is subject to subsection (3).
(3)    If the company is a member of a group, it may surrender the whole	15
or any part of the step 2 amount to any other member of the group
(the “relevant group member”).
In such a case, section 104R(3) applies to the amount surrendered as
it applies to an amount of R&D expenditure credit surrendered
under step 5 in section 104N(2).	20
(4)    If any of the amount surrendered under subsection (3) is remaining
after the operation of step 3 in section 104R(3), it is to be treated for
the purposes of this section as if it had not been surrendered to the
relevant group member.
(5)    Any amounts to be applied under subsection (2) or (3) in discharging	25
any liability of a company to pay corporation tax for an accounting
period are to be so applied before any amounts that may be so
applied under step 1, 4 or 5 in section 104N(2).
(6)    The surrender by a company of the whole or any part of the step 2
amount to another company under this section—	30
(a)    is not to be taken into account in determining the profits or
losses of either company for corporation tax purposes, and
(b)    for corporation tax purposes is not to be regarded as the
making of a distribution.
(7)    Any reference in this section to the set-off amount, or the net value of	35
the set-off amount, is to be read in accordance with section 104N.
104P     Total expenditure on workers
(1)    For the purposes of section 104N, the amount of a company’s total
expenditure on workers for an accounting period is the sum of—
(a)    the relevant portion of the company’s staffing costs for the	40
period (see subsection (2)), and
(b)    if the company is a member of a group and has incurred
expenditure on any externally provided workers, the
relevant portion of any staffing costs for the period incurred
by another member of the group (the “relevant group	45
company”) in providing any of those workers for the
company (see subsection (3)).
Finance Bill Schedule 15 — R&D expenditure credits Part 1 — Amendments of CTA 2009 258
(2)    The relevant portion of the company’s staffing costs for an
accounting period is the amount of those costs that—
(a)    are paid to, or in respect of, directors or employees who are
directly and actively engaged in relevant research and
development (whether they are wholly or partly so engaged),	5
and
(b)    form part of the total amount of the company’s PAYE and
NIC liabilities for the accounting period (see section 104Q).
(3)    The relevant portion of any staffing costs for an accounting period
incurred by a relevant group company in providing externally	10
provided workers for the company is the sum of the amounts to be
determined in the case of each of those workers as follows—
Step 1
Calculate the amount of expenditure that—
(a)    has been incurred by the relevant group company in	15
providing the externally provided worker for the company,
(b)    has been incurred on staffing costs, and
(c)    forms part of the total amount of the relevant group
company’s PAYE and NIC liabilities for the accounting
period (see section 104Q).	20
Step 2
Calculate the percentage (the “appropriate percentage”) given by—
where—
R is the amount of the company’s qualifying expenditure on the
externally provided worker that has been taken into account	25
in calculating the amount of the company’s qualifying R&D
expenditure for the period, and
T is the total amount of the company’s qualifying expenditure
on the externally provided worker.
Step 3	30
The amount to be determined in the case of the externally provided
worker is the appropriate percentage of the amount given by step 1.
104Q     Total amount of company’s PAYE and NIC liabilities
(1)    For the purposes of section 104P the total amount of a company’s
PAYE and NIC liabilities for an accounting period is the sum of—	35
(a)    amount A, and
(b)    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 accounting period.	40
(3)    In calculating amount A disregard any deduction the company is
authorised to make in respect of child tax credit or working tax
credit.
Finance Bill Schedule 15 — R&D expenditure credits Part 1 — Amendments of CTA 2009 259
(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 disregard any deduction the company is
authorised to make in respect of payments of statutory sick pay,	5
statutory maternity pay, child tax credit or working tax credit.
(6)    In a case where the company is required to account for any amount
of income tax or Class 1 national insurance contributions for a
payment period that does not fall wholly within the accounting
period, the portion of that amount to be included in the total amount	10
of the company’s PAYE and NIC liabilities for the accounting period
is to be determined on such basis as is just and reasonable in all the
circumstances.
104R     Surrender of credit to other group companies
(1)    This section applies if—	15
(a)    a company is entitled to an R&D expenditure credit under
this Chapter for an accounting period (“the surrender
period”), and
(b)    the company surrenders the whole or any part of the credit to
another member of the group (the “relevant group member”)	20
under step 5 in section 104N(2).
(2)    In this section an accounting period of a relevant group member is a
“relevant accounting period” if there is a period (“the overlapping
period”) that is common to the accounting period and the surrender
period.	25
(3)    The amount surrendered is to be applied in discharging any liability
of the relevant group member to pay corporation tax for any relevant
accounting period as follows—
Step 1
Take the proportion of the relevant accounting period included in	30
the overlapping period.
Apply that proportion to the amount of corporation tax payable by
the relevant group member for the relevant accounting period.
Step 2
Take the proportion of the surrender period included in the	35
overlapping period.
Apply that proportion to the amount surrendered to the relevant
group member.
Step 3
The amount given by step 2 is to be applied in discharging the	40
amount given by step 1.
(4)    If any of the amount surrendered is remaining after the operation of
step 3 in subsection (3), it is to be treated for the purposes of section
104N as if it had not been surrendered to the relevant group member.
(5)    The surrender by a company of the whole or any part of an R&D	45
expenditure credit to another company under step 5 in section
104N(2)—
Finance Bill Schedule 15 — R&D expenditure credits Part 1 — Amendments of CTA 2009 260
(a)    is not to be taken into account in determining the profits or
losses of either company for corporation tax purposes, and
(b)    for corporation tax purposes is not to be regarded as the
making of a distribution.
104S     Restrictions on payment of R&D expenditure credit	5
(1)    This section applies if—
(a)    a company is entitled to an R&D expenditure credit for an
accounting period under this Chapter, and
(b)    an amount of the R&D expenditure credit is payable to the
company under step 7 of section 104N(2).	10
(2)    If at the time of claiming the credit the company was not a going
concern (see section 104T)—
(a)    the company is not entitled to be paid that amount, and
(b)    that amount is extinguished.
(3)    But if the company becomes a going concern on or before the last day	15
on which an amendment of the company’s tax return for the
accounting period could be made under paragraph 15 of Schedule 18
to FA 1998, the company is entitled to be paid that amount.
(4)    If the company’s tax return for the accounting period is enquired into
by an officer of Revenue and Customs—	20
(a)    no payment of that amount need be made before the officer’s
enquiries are completed (see paragraph 32 of Schedule 18 to
FA 1998), but
(b)    the officer may make a payment on a provisional basis of
such amount as the officer thinks fit.	25
(5)    No payment of that amount need be made if the company has
outstanding PAYE and NIC liabilities for the period.
(6)    A company has outstanding PAYE and 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—	30
(a)    under PAYE regulations, or
(b)    in respect of Class 1 national insurance contributions,
for payment periods ending in the accounting period.
104T     “Going concern”
(1)    For the purposes of section 104S(2) and (3) a company is a going	35
concern if—
(a)    its latest published accounts were prepared on a going
concern basis, and
(b)    nothing in those accounts indicates that they were only
prepared on that basis because of an expectation that the	40
company would receive R&D expenditure credits under this
Chapter.
This is subject to subsection (2).
(2)    A company is not a going concern at any time if it is in administration
or liquidation at that time.	45
(3)    For the purposes of this section a company is in administration if—
Finance Bill Schedule 15 — R&D expenditure credits Part 1 — Amendments of CTA 2009 261
(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.
(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	10
territory outside the United Kingdom exists in relation to the
company.
(5)    Section 436(2) of the Companies Act 2006 (meaning of “publication”
of documents) has effect for the purposes of this section.
Insurance companies	15
104U     Insurance companies treated as large companies
(1)    This section applies if an insurance company—
(a)    carries on life assurance business in an accounting period,
and
(b)    is a small or medium-sized enterprise in the period.	20
(2)    For the purposes of this Chapter the company is to be treated as if it
were not such an enterprise in the period (and accordingly is to be
treated as a large company for the purposes of this Chapter).
(3)    Section 1119 (meaning of “small or medium-sized enterprise”), as it
has effect for the purposes of this Chapter (see section 104Y), is to be	25
read subject to this section.
104V     Entitlement to credit: I minus E basis
(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	30
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)    Section 104A has effect as if—	35
(a)    the reference in subsection (1) to calculating the profits of a
trade were a reference to calculating the I-E profit of the basic
life assurance and general annuity business carried on by the
company, and
(b)    the reference in subsection (2) to qualifying R&D expenditure	40
allowable as a deduction in calculating the profits of a trade
for an accounting period were a reference to any such
expenditure that would be allowable as such a deduction if
the company were to calculate its BLAGAB trade profit or
loss for the period.	45
Finance Bill Schedule 15 — R&D expenditure credits Part 1 — Amendments of CTA 2009 262
(3)    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
(4)    In this section “BLAGAB trade profit” and “BLAGAB trade loss”
have the meaning given by section 136 of FA 2012.
Group companies
104W     R&D expenditure of group companies
(1)    This section applies if—	10
(a)    a company (“A”) incurs expenditure on making a payment to
another company (“B”) in respect of activities contracted out
by A to B,
(b)    the activities would, if carried out by A, be research and
development of A (taken together with A’s other activities),	15
and
(c)    A and B are members of the same group at the time the
payment is made.
(2)    If the activities are undertaken by B itself, they are to be treated for
the purposes of this Chapter (so far as it would not otherwise be the	20
case) as research and development undertaken by B itself.
(3)    If B makes a payment to a third party (“C”), any of the activities—
(a)    contracted out by B to C, and
(b)    undertaken by C itself,
are to be treated for the purposes of this Chapter (so far as it would	25
not otherwise be the case) as research and development contracted
out by B to C.
Anti-avoidance
104X     Artificially inflated claims for credit
(1)    To the extent that a transaction is attributable to arrangements	30
entered into wholly or mainly for a disqualifying purpose, it is to be
disregarded for the purpose of determining for an accounting period
R&D expenditure credits to which a company is entitled under this
Chapter.
(2)    Arrangements are entered into wholly or mainly for a “disqualifying	35
purpose” if their main object, or one of their main objects, is to enable
a company to obtain—
(a)    an R&D expenditure credit under this Chapter to which it
would not otherwise be entitled, or
(b)    an R&D expenditure credit under this Chapter of a greater	40
amount than that to which it would otherwise be entitled.
(3)    In this section “arrangements” includes any scheme, agreement or
understanding, whether or not legally enforceable.