Corporation Tax Bill

House of Commons

Session 2008 - 09
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 13 — Additional relief for expenditure on research and development
Chapter 9 — Supplementary
528

1129
Qualifying expenditure on externally provided workers: connected persons
(1)
This section applies if—
(a)
a company makes a staff provision payment,
(b)
the company and the staff provider are connected, and
(c)
in accordance with generally accepted accounting practice, the whole
5
of the staff provision payment and all of the staff provider’s relevant
expenditure have been brought into account in determining the staff
provider’s profit or loss for a relevant period.
(2)
The company’s qualifying expenditure on externally provided workers is—
(a)
the entire staff provision payment, or
10
(b)
if less, an amount equal to the staff provider’s relevant expenditure.
(3)
“Relevant expenditure” of the staff provider means expenditure that—
(a)
is incurred by the staff provider in providing for the company the
externally provided workers to whom the staff provision payment
relates,
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(b)
is not of a capital nature, and
(c)
is incurred on staffing costs or agency workers’ remuneration.
(4)
“Relevant period” means a period—
(a)
for which accounts are drawn up for the staff provider, and
(b)
that ends not more than 12 months after the end of the company’s
20
period of account in which the staff provision payment is, in
accordance with generally accepted accounting practice, brought into
account in determining the company’s profit or loss.
(5)
In section 1123 (meaning of “staffing costs”), which applies for the purpose of
determining whether the staff provider’s expenditure meets the requirements
25
of subsection (3)(c), references to a company are to be read as references to the
staff provider.
(6)
“Agency workers’ remuneration”, in the case of any person who is an
externally provided worker in relation to the company, means remuneration
that—
30
(a)
is receivable by the worker under or in consequence of the contract
mentioned in section 1128(7), but
(b)
does not constitute employment income of the worker apart from
Chapter 7 of Part 2 of ITEPA 2003 (application of provisions to agency
workers).
35
(7)
Any apportionment of expenditure of the company or staff provider necessary
for the purposes of this section is to be made on a just and reasonable basis.
1130
Election for connected persons treatment
(1)
A company and a staff provider who are not connected may jointly elect that
section 1129 is to apply to them as if they were connected.
40
(2)
Any such election must be made in relation to all staff provision payments paid
under the same contract or other arrangement.
(3)
The election must be made by notice in writing to an officer of Revenue and
Customs.

Corporation Tax Bill
Part 13 — Additional relief for expenditure on research and development
Chapter 9 — Supplementary
529

(4)
The notice must be given before the end of the period of two years beginning
immediately after the end of the company’s accounting period in which the
contract or other arrangement is entered into.
(5)
An election under this section is irrevocable.
1131
Qualifying expenditure on externally provided workers: other cases
5
(1)
This section applies if—
(a)
a company makes a staff provision payment,
(b)
the company and the staff provider are not connected persons, and
(c)
no election is made under section 1130.
(2)
The company’s qualifying expenditure on externally provided workers is 65%
10
of the staff provision payment.
1132
External workers: attributable expenditure
(1)
This section applies for the purposes of this Part to identify when qualifying
expenditure on externally provided workers is attributable to relevant research
and development.
15
(2)
Qualifying expenditure on externally provided workers is so attributable if the
workers are directly and actively engaged in relevant research and
development.
(3)
Subsection (4) applies if an externally provided worker is partly engaged
directly and actively in relevant research and development.
20
(4)
The appropriate proportion of the qualifying expenditure relating to the
worker is treated as attributable to relevant research and development.
(5)
Subsection (6) applies if persons provide services (such as secretarial or
administrative services) in support of activities carried on by others.
(6)
Those persons are not, as a result of providing those services, to be treated as
25
themselves directly and actively engaged in those activities.
Sub-contractor payments
1133
“Sub-contractor” and “sub-contractor payment”
(1)
In this Part a “sub-contractor payment” means a payment made by a company
to another person (“the sub-contractor”) in respect of research and
30
development contracted out by the company to that person.
(2)
Sections 1134 to 1136 apply if a company makes a sub-contractor payment.
(3)
They apply for the purpose of determining the qualifying element of the
payment for the purposes of—
section 1053(1)(a),
35
section 1072(1)(a), and
section 1102(2).

Corporation Tax Bill
Part 13 — Additional relief for expenditure on research and development
Chapter 9 — Supplementary
530

1134
Qualifying element of sub-contractor payment: connected persons
(1)
This section applies if—
(a)
a company makes a sub-contractor payment,
(b)
the company and the sub-contractor are connected, and
(c)
in accordance with generally accepted accounting practice, the whole
5
of the sub-contractor payment and all of the sub-contractor’s relevant
expenditure have been brought into account in determining the sub-
contractor’s profit or loss for a relevant period.
(2)
The qualifying element of the sub-contractor payment is—
(a)
the entire payment, or
10
(b)
if less, an amount equal to the sub-contractor’s relevant expenditure.
(3)
“Relevant expenditure” of the sub-contractor means expenditure that—
(a)
is incurred by the sub-contractor in carrying on, on behalf of the
company, the activities to which the sub-contractor payment relates,
(b)
is not of a capital nature,
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(c)
is incurred on staffing costs, software or consumable items or relevant
payments to the subjects of a clinical trial or is qualifying expenditure
on externally provided workers, and
(d)
is not subsidised.
(4)
“Relevant period” means a period—
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(a)
for which accounts are drawn up for the sub-contractor, and
(b)
that ends not more than 12 months after the end of the company’s
period of account in which the sub-contractor payment is, in
accordance with generally accepted accounting practice, brought into
account in determining the company’s profit or loss.
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(5)
In the following sections, which apply for the purpose of determining whether
a sub-contractor’s expenditure meets the requirements of subsection (3)(c) and
(d)—
(a)
section 1123 (staffing costs),
(b)
sections 1127 to 1131 (qualifying expenditure on externally provided
30
workers), and
(c)
section 1138 (subsidised expenditure),

references to a company are to be read as references to the sub-contractor.
(6)
Any apportionment of expenditure of the company or the sub-contractor
necessary for the purposes of this section is to be made on a just and reasonable
35
basis.
1135
Election for connected persons treatment
(1)
A company and a sub-contractor who are not connected may jointly elect that
section 1134 is to apply to them as if they were connected.
(2)
Any such election must be made in relation to all sub-contractor payments paid
40
under the same contract or other arrangement.
(3)
The election must be made by notice in writing to an officer of Revenue and
Customs.

Corporation Tax Bill
Part 13 — Additional relief for expenditure on research and development
Chapter 9 — Supplementary
531

(4)
The notice must be given before the end of the period of two years beginning
immediately after the end of the company’s accounting period in which the
contract or other arrangement is entered into.
(5)
An election under this section is irrevocable.
1136
Qualifying element of sub-contractor payment: other cases
5
(1)
This section applies if—
(a)
a company makes a sub-contractor payment,
(b)
the company and the sub-contractor are not connected persons, and
(c)
no election is made under section 1135.
(2)
The qualifying element of the sub-contractor payment is 65% of the sub-
10
contractor payment.
Miscellaneous
1137
Accounting periods: company not within charge to corporation tax
(1)
This section applies to a company if—
(a)
it is not within the charge to corporation tax, and
15
(b)
it incurs qualifying Chapter 2 expenditure or qualifying Chapter 7
expenditure.
(2)
For the purposes of this Part the company is treated as having the accounting
periods it would have if—
(a)
it carried on a trade consisting of the activities in respect of which the
20
expenditure is incurred, and
(b)
it had started to carry on that trade when it started to carry on relevant
research and development.
1138
“Subsidised expenditure”
(1)
For the purposes of this Part a company’s expenditure is treated as
25
subsidised—
(a)
if a notified State aid is, or has been, obtained in respect of—
(i)
the whole or part of the expenditure, or
(ii)
any other expenditure (whenever incurred) attributable to the
same research and development project,
30
(b)
to the extent that a grant or subsidy (other than a notified State aid) is
obtained in respect of the expenditure,
(c)
to the extent that it is otherwise met directly or indirectly by a person
other than the company.
(2)
In this section “notified State aid” means a State aid notified to and approved
35
by the European Commission.
(3)
For this purpose the following are not State aids—
(a)
relief under this Part, and
(b)
R&D tax credits under this Part.

Corporation Tax Bill
Part 13 — Additional relief for expenditure on research and development
Chapter 9 — Supplementary
532

(4)
For the purposes of this Part a notified State aid, grant, subsidy or payment that
is not allocated to particular expenditure is to be allocated to expenditure of the
recipient on a just and reasonable basis.
1139
“Intellectual property”
In this Part “intellectual property” means—
5
(a)
industrial information or techniques likely to assist in—
(i)
the manufacture or processing of goods or materials, or
(ii)
the working of a mine, oil well or other source of mineral
deposits or the winning of access to them, or
(iii)
the carrying out of any agricultural, forestry or fishing
10
operations,
(b)
a patent, trade mark, registered design, copyright, design right or plant
breeder’s right, and
(c)
a right under the law of a country outside the United Kingdom which
corresponds or is similar to any of those falling within paragraph (b).
15
1140
“Relevant payments to the subjects of a clinical trial”
(1)
For the purposes of this Part “relevant payment”, in relation to a subject of a
clinical trial, means a payment made to the subject for participating in the trial.
(2)
For the purposes of this Part “clinical trial” means an investigation in human
subjects undertaken in connection with the development of a health care
20
treatment or procedure.
1141
“Payment period”
In this Part a “payment period” means a period—
(a)
which ends on the fifth day of a month, and
(b)
for which the company is liable to account for income tax and national
25
insurance contributions to an officer of Revenue and Customs.
1142
“Qualifying body”
(1)
For the purposes of this Part “qualifying body” means—
(a)
a charity,
(b)
an institution of higher education,
30
(c)
an association of a description specified in section 508 of ICTA
(scientific research organisation),
(d)
a health service body within the meaning of section 519A(2) of that Act,
or
(e)
any other body prescribed, or of a description prescribed, by the
35
Treasury, by order, for the purposes of this Part.
(2)
In subsection (1)(b) “institution of higher education” means—
(a)
an institution within the higher education sector within the meaning of
the Further and Higher Education Act 1992 (c. 13),
(b)
an institution within the higher education sector within the meaning of
40
Part 2 of the Further and Higher Education (Scotland) Act 1992 (c. 37)
or a central institution within the meaning of the Education (Scotland)
Act 1980 (c. 44), or

Corporation Tax Bill
Part 14 — Remediation of contaminated land
Chapter 1 — Introduction
533

(c)
a higher education institution within the meaning of Article 30(3) of the
Education and Libraries (Northern Ireland) Order 1993 (S.I. 1993/2810
(N.I. 12)).
(3)
An order under this section is to have effect in relation to the accounting
periods or expenditure specified in the order.
5
(4)
The order may specify accounting periods beginning, or expenditure incurred,
before the time the order is made.
Part 14
Remediation of contaminated land
Chapter 1
10
Introduction
Introductory
1143
Overview of Part
(1)
This Part provides for corporation tax relief for expenditure on land in the
United Kingdom, where the expenditure is incurred for the purpose of
15
remedying contamination of the land.
(2)
The reliefs available under Chapter 2 are—
(a)
a deduction in calculating the profits of a UK property business or a
trade carried on by a company for expenditure which is capital
expenditure, and
20
(b)
an additional deduction for expenditure which is allowed as a
deduction in calculating the profits of such a business or trade.
(3)
Chapter 3 provides for the payment of tax credits (“land remediation tax
credits”) where a company—
(a)
obtains relief under Chapter 2, and
25
(b)
makes a loss in a UK property business or a trade.
(4)
Chapter 4 contains provision about—
(a)
the relief available to a company which carries on life assurance
business, and
(b)
the payment of tax credits (“life assurance company tax credits”) to
30
such a company.
(5)
Chapter 5 contains an anti-avoidance provision dealing with artificially
inflated claims for relief under this Part or tax credits.
(6)
Chapter 6 contains supplementary provision, including definitions.
(7)
For information about the procedure for making claims under this Part see
35
Schedule 18 to FA 1998, in particular Part 9B (claims relating to remediation of
contaminated land) of that Schedule.