House of Commons portcullis
House of Commons
Session 2007 - 08
Internet Publications
Other Bills before Parliament

Finance Bill


Finance Bill (Volume II)
Section 24 — Rates of research and development relief and vaccine research relief

228

 

Schedule 8

Section 24

 

Rates of research and development relief and vaccine research relief

Rates of research and development relief: SMEs

1     (1)  

Part 2 of Schedule 20 to FA 2000 (giving effect to R&D tax relief) is amended

as follows.

      (2)  

In each of the following provisions, for “150%” substitute “175%”—

(a)   

paragraph 13 (deduction in computing profits of trade),

(b)   

paragraph 14(2) (alternative treatment of pre-trading expenditure),

and

(c)   

paragraph 15(3)(b) (entitlement to R&D tax credit).

      (3)  

In paragraph 16(1)(a) (amount of R&D tax credit), for “16%” substitute

“14%”.

      (4)  

The amendments made by this paragraph have effect in relation to

expenditure incurred on or after such day as the Treasury may by order

appoint.

      (5)  

The Treasury may appoint a day before the day on which this Act is passed,

but not one before 1 April 2008.

Rates of research and development tax relief: large companies

2     (1)  

In Schedule 12 to FA 2002 (tax relief for expenditure on research and

development), in both of the following provisions, for “25%” substitute

“30%”—

(a)   

paragraph 11(2) (deduction in computing profits of trade), and

(b)   

paragraph 15(4) (refunds of contributions to independent research

and development etc).

      (2)  

The amendments made by sub-paragraph (1) have effect in relation to

expenditure incurred on or after 1 April 2008.

Rates of vaccine research relief

3     (1)  

Schedule 13 to FA 2002 (vaccine research relief) is amended as follows.

      (2)  

In each of the following provisions, for “50%” substitute “40%”—

(a)   

paragraph 14(2) (deduction in computing profits of trade: small and

medium-sized companies),

(b)   

paragraph 15(2)(a) (alternative treatment of pre-trading expenditure:

deemed trading loss),

(c)   

paragraph 15A(2) (modifications for larger SMEs claiming R&D tax

credits),

(d)   

paragraph 21(2) (deduction in computing profits of trade: large

companies), and

(e)   

paragraph 25(4)(a)(i) and (b)(i) (refunds of contributions to

independent research and development).

      (3)  

In each of the following provisions, for “150%” substitute “140%”—

(a)   

paragraph 15(2)(b) (alternative treatment of pre-trading

expenditure: deemed trading loss),

 
 

Finance Bill (Volume II)
Schedule 9 — Companies in difficulty: SME R&D relief and vaccine research relief

229

 

(b)   

paragraph 16A(1) (entitlement to tax credit: modifications for larger

SMEs),

(c)   

paragraph 21(3) (deduction in computing profits of trade: large

companies), and

(d)   

paragraph 25(4)(a)(ii) and (b)(ii) (refunds of contributions to

independent research and development).

      (4)  

The amendments made by this paragraph have effect in relation to

expenditure incurred on or after such day as the Treasury may by order

appoint.

      (5)  

The Treasury may appoint a day before the day on which this Act is passed,

but not one before 1 April 2008.

Schedule 9

Section 26

 

Companies in difficulty: SME R&D relief and vaccine research relief

Research and development relief

1     (1)  

Schedule 20 to FA 2000 (tax relief for expenditure on research and

development) is amended as follows.

      (2)  

In paragraph 13 (deduction in computing profits of trade), insert at the end

“(subject to paragraph 18A)”.

      (3)  

In paragraph 14(2) (alternative treatment of pre-trading expenditure), insert

at the end “(subject to paragraph 18A)”.

      (4)  

In paragraph 15(1) (entitlement to R&D tax credit), insert at the end “(subject

to paragraph 18A)”.

      (5)  

In paragraph 18 (payment in respect of R&D tax credit) insert at the end—

    “(5)  

This paragraph has effect subject to paragraph 18A.”

      (6)  

After that paragraph insert—

“R&D tax relief or tax credit only available where company is a going concern

18A   (1)  

A company may only make—

(a)   

a claim under paragraph 13,

(b)   

an election under paragraph 14, or

(c)   

a claim under paragraph 15,

           

at a time when it is a going concern.

      (2)  

If a company ceases to be a going concern after making a claim for

an R&D tax credit under paragraph 15, it shall be treated as if it

had not made the claim (and, accordingly, as if there had been no

payment of R&D tax credit to carry interest under section 826 of

the Taxes Act 1988).

      (3)  

Sub-paragraph (2) does not apply to the extent that the claim

relates to an amount that was paid or applied before the company

ceased to be a going concern.

 
 

Finance Bill (Volume II)
Schedule 9 — Companies in difficulty: SME R&D relief and vaccine research relief

230

 

      (4)  

For the purposes of this paragraph, 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 only

prepared on that basis because of an expectation that the

company would receive relief or tax credits under this

Schedule or Schedule 13 to the Finance Act 2002.

      (5)  

Section 436(2) of the Companies Act 2006 (meaning of

“publication” of documents) has effect for the purposes of this

paragraph.”

Vaccine research relief

2     (1)  

Schedule 13 to FA 2002 (tax relief for expenditure on vaccine research etc) is

amended as follows.

      (2)  

In paragraph 14(1) (deduction in computing profits of trade), insert at the

end “(subject to paragraph 18A)”.

      (3)  

In paragraph 15(1) (alternative treatment of pre-trading expenditure:

deemed trading loss), insert at the end “(subject to paragraph 18A)”.

      (4)  

In paragraph 16(1) (entitlement to tax credit), insert at the end “(subject to

paragraph 18A)”.

      (5)  

In paragraph 18 (payment in respect of tax credit) insert at the end—

    “(5)  

This paragraph has effect subject to paragraph 18A.”

      (6)  

After that paragraph insert—

“Relief or tax credit only available where company is a going concern

18A   (1)  

A company may only make—

(a)   

a claim under paragraph 14,

(b)   

an election under paragraph 15, or

(c)   

a claim under paragraph 16,

           

at a time when it is a going concern.

      (2)  

If a company ceases to be a going concern after making a claim for

a tax credit under paragraph 16, it shall be treated as if it had not

made the claim (and, accordingly, as if there had been no payment

of tax credit to carry interest under section 826 of the Taxes Act

1988).

      (3)  

Sub-paragraph (2) does not apply to the extent that the claim

relates to an amount that was paid or applied before the company

ceased to be a going concern.

      (4)  

For the purposes of this paragraph, 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 only

prepared on that basis because of an expectation that the

 
 

Finance Bill (Volume II)
Schedule 10 — Cap on R&D aid
Part 1 — Calculation of total R&D aid

231

 

company would receive relief or tax credits under this

Schedule or Schedule 20 to the Finance Act 2000.

      (5)  

Section 436(2) of the Companies Act 2006 (meaning of

“publication” of documents) has effect for the purposes of this

paragraph.”

Commencement

3          

The amendments made by this Schedule have effect in relation to claims and

elections made, and amounts paid or applied, on or after such day as the

Treasury may by order appoint.

Schedule 10

Section 27

 

Cap on R&D aid

Part 1

Calculation of total R&D aid

Calculation of total R&D aid

1          

For the purposes of section 27, “total R&D aid”, in respect of expenditure by

a company (the “claimant”) attributable to a research and development

project, is calculated as follows—equation: equal[char[A],plus[id[plus[times[char[T],char[C]],char[R],id[cross[char[P],times[

char[C],char[T]]]]]],minus[id[cross[char[N],times[char[C],char[T]]]]]]]

           

where—

A is total R&D aid,

TC is the tax credits (see paragraph 2),

R is the actual reduction in tax liability (see paragraph 3),

P is the potential relief (see paragraph 4),

CT is the main rate of corporation tax at the time when the total R&D

aid is calculated, and

N is the notional relief (see paragraph 5).

2     (1)  

In paragraph 1 “the tax credits” means the aggregate of the tax credits that

have been paid to the claimant under paragraph 18 of Schedule 20 to FA

2000 or paragraph 18 of Schedule 13 to FA 2002 in respect of expenditure

attributable to the project.

      (2)  

A tax credit that has been claimed but not paid or applied shall be treated for

the purposes of sub-paragraph (1) as if it had been paid, unless the claimant

has been informed by Her Majesty’s Revenue and Customs that the tax

credit will not be paid or applied.

3          

In paragraph 1 “the actual reduction in tax liability” means the aggregate

of—

(a)   

the amounts by which the liability of the claimant to pay corporation

tax has been reduced in any accounting period in consequence of

R&D relief in respect of expenditure attributable to the project, and

(b)   

the amounts by which the liability of any other company to pay

corporation tax has been reduced in any accounting period in

 
 

Finance Bill (Volume II)
Schedule 10 — Cap on R&D aid
Part 2 — Consequential amendments

232

 

consequence of a surrender to the company by the claimant under

section 402 of ICTA (surrender of relief between members of groups

and consortia) of a loss arising in consequence of R&D relief in

respect of expenditure attributable to the project.

4     (1)  

In paragraph 1 “the potential relief” means the aggregate amount of any

R&D relief (other than a tax credit)—

(a)   

in respect of which the claimant has made a claim or election, but

(b)   

which, as at the day on which the total R&D aid is calculated, has not

been brought into account by the claimant or by any other company.

      (2)  

R&D relief shall not be counted for the purposes of sub-paragraph (1) if the

claimant has been informed by Her Majesty’s Revenue and Customs that it

is not entitled to the relief.

5     (1)  

In paragraph 1 “the notional relief” is the aggregate amount of relief that the

claimant could have claimed under Schedule 12 to FA 2002 (tax relief for

expenditure on R&D: large companies etc) in any accounting period in

respect of qualifying R&D expenditure attributable to the project if it had

been a large company throughout the accounting period.

      (2)  

In this paragraph—

“large company” has the meaning given in paragraph 2 of Schedule 12

to FA 2002, and

“qualifying R&D expenditure” means expenditure that, in the

accounting period in question, was—

(a)   

qualifying R&D expenditure within the meaning of Schedule

20 to FA 2000, or

(b)   

qualifying expenditure within the meaning of Schedule 13 to

FA 2002.

Interpretation

6          

In this Schedule “R&D relief” means any relief or tax credit under—

(a)   

Schedule 20 to FA 2000 (tax relief for expenditure by SMEs on

research and development), or

(b)   

Schedule 13 to FA 2002 (tax relief for expenditure on vaccine research

etc).

Transitional provision

7          

For the purpose of any calculation in accordance with paragraph 1, no

account shall be taken of any R&D relief in respect of expenditure incurred

before the day on which this Schedule comes into force.

Part 2

Consequential amendments

8          

In Schedule 20 to FA 2000 (tax relief for expenditure by SMEs on research

and development), in paragraph 1 (entitlement), insert at the end—

    “(5)  

This paragraph has effect subject to section 27 of the Finance Act

2008 (cap on R&D aid).”

 
 

Finance Bill (Volume II)
Schedule 11 — Venture capital schemes

233

 

9          

In Schedule 12 to FA 2002 (tax relief for expenditure on research and

development)—

(a)   

after paragraph 10B insert—

“Capped SME expenditure

10C        

For the purposes of this Schedule, the SME’s “capped SME

expenditure” is any expenditure—

(a)   

in respect of which the company is not entitled to

relief under Schedule 20 to the Finance Act 2000 by

reason only of section 27 of the Finance Act 2008

(cap on R&D aid), and

(b)   

which satisfies paragraph 10B(a) and (c).”,

(b)   

in paragraph 11(3)(c), insert at the end “and capped SME

expenditure (see paragraph 10C)”, and

(c)   

in paragraph 15(1)(d), insert at the end “or capped SME

expenditure”.

10         

In Schedule 13 to FA 2002 (tax relief for expenditure on vaccine research etc),

in paragraph 1 (entitlement), insert at the end—

    “(3)  

This paragraph has effect subject to section 27 of the Finance Act

2008 (cap on R&D aid).”

Schedule 11

Section 30

 

Venture capital schemes

Corporate Venturing Scheme

1          

Part 3 of Schedule 15 to FA 2000 (CVS: the issuing company) is amended as

follows.

2          

In paragraph 26 (excluded activities)—

(a)   

in sub-paragraph (1), after paragraph (h) insert—

“(ha)   

shipbuilding;

(hb)   

producing coal;

(hc)   

producing steel;”, and

(b)   

in sub-paragraph (2), after the entry relating to paragraph 30 insert—

“paragraph 30A (shipbuilding);

paragraph 30B (producing coal);

paragraph 30C (producing steel);”.

3          

After paragraph 30 insert—

“Excluded activities: shipbuilding

30A        

In paragraph 26(1)(ha) “shipbuilding” has the same meaning as in

the Framework on state aid to shipbuilding (2003/C 317/06),

published in the Official Journal on 30 December 2003.

 
 

Finance Bill (Volume II)
Schedule 11 — Venture capital schemes

234

 

Excluded activities: producing coal

30B   (1)  

This paragraph supplements paragraph 26(1)(hb).

      (2)  

“Coal” has the meaning given by Article 2 of Council Regulation

(EC) No. 1407/2002 (state aid to coal industry).

      (3)  

The production of coal includes the extraction of it.

Excluded activities: producing steel

30C        

In paragraph 26(1)(hc) “steel” means any of the steel products

listed in Annex 1 to the Guidelines on national regional aid (2006/

C 54/08), published in the Official Journal on 4 March 2006.”

Enterprise Investment Scheme

4          

Chapter 4 of Part 5 of ITA 2007 (EIS: the issuing company) is amended as

follows.

5          

In section 192 (meaning of “excluded activities”)—

(a)   

in subsection (1), after paragraph (i) insert—

“(ia)   

shipbuilding,

(ib)   

producing coal,

(ic)   

producing steel,”, and

(b)   

in subsection (2), after paragraph (d) insert—

“(da)   

section 196A (shipbuilding),

(db)   

section 196B (producing coal),

(dc)   

section 196C (producing steel),”.

6          

After section 196 insert—

“196A   

Excluded activities: shipbuilding

In section 192(1)(ia) “shipbuilding” has the same meaning as in the

Framework on state aid to shipbuilding (2003/C 317/06), published

in the Official Journal on 30 December 2003.

196B    

Excluded activities: producing coal

(1)   

This section supplements section 192(1)(ib).

(2)   

“Coal” has the meaning given by Article 2 of Council Regulation (EC)

No. 1407/2002 (state aid to coal industry).

(3)   

The production of coal includes the extraction of it.

196C    

Excluded activities: producing steel

In section 192(1)(ic) “steel” means any of the steel products listed in

Annex 1 to the Guidelines on national regional aid (2006/C 54/08),

published in the Official Journal on 4 March 2006.”

Venture capital trusts

7          

Chapter 4 of Part 6 of ITA 2007 (VCTs: qualifying holdings) is amended as

follows.

 
 

 
previous section contents continue
 
House of Commons home page Houses of Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 2008
Revised 23 June 2008