Part 13Additional relief for expenditure on research and development
Chapter 6Chapters 2 to 5: further provision
1081Insurance 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.
2
For the purposes of Chapters 2 to 5 the company is to be treated as if it were not such an enterprise in the period.
3
Accordingly the company is to be treated as a large company for the purposes of Chapter 5.
1082R&D expenditure of group companies
1
This section applies if—
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), 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 Chapters 3 and 5 (so far as it would not otherwise be the 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 Chapters 3 and 5 (so far as it would not otherwise be the case) as research and development contracted out by B to C.
4
For the purposes of this section A and B are members of the same group if they are members of the same group of companies for the purposes of Chapter 4 of Part 10 of ICTA (group relief).
1083Refunds of expenditure treated as income chargeable to tax
1
This section applies if a company receives a payment (“the refund”) refunding the whole or any part of expenditure—
a
to which subsection (2) applies, and
b
in respect of which the company obtains relief under Chapter 3, 4 or 5.
2
This subsection applies to—
a
qualifying Chapter 3 expenditure to which section 1067 applies (expenditure on sub-contracted R&D not undertaken in-house),
b
qualifying Chapter 4 expenditure (subsidised expenditure on R&D),
c
capped R&D expenditure, and
d
qualifying Chapter 5 expenditure which is—
i
qualifying expenditure on contracted out research and development under section 1078, or
ii
qualifying expenditure on contributions to independent research and development under section 1079.
3
30% of the refund is to be treated as income of the company chargeable to tax under Chapter 2 of Part 3 for the accounting period in which the refund is made.
4
But subsection (3) does not apply if, because of section 1080(4) (gross roll-up business), the relief obtained in respect of the expenditure concerned is an additional deduction in calculating for corporation tax purposes the profits of gross roll-up business of the company.
5
In that case 30% of the refund is to be treated as income which is—
a
referable to the gross roll-up business, and
b
chargeable, for the accounting period in which the refund is made, under the charge to corporation tax on income.
1084Artificially inflated claims for relief or tax credit
1
To the extent that a transaction is attributable to arrangements entered into wholly or mainly for a disqualifying purpose, it is to be disregarded for the purposes mentioned in subsection (2).
2
Those purposes are—
a
determining for an accounting period relief to which a company is entitled under Chapters 2 to 5, and
b
determining for an accounting period R&D tax credits to which a company is entitled under Chapter 2.
3
Arrangements are entered into wholly or mainly for a “disqualifying purpose” if their main object, or one of their main objects, is to enable a company to obtain—
a
relief under Chapters 2 to 5 to which it would not otherwise be entitled,
b
relief under Chapters 2 to 5 of a greater amount than that to which it would otherwise be entitled,
c
an R&D tax credit under Chapter 2 to which it would not otherwise be entitled, or
d
an R&D tax credit under Chapter 2 of a greater amount than that to which it would otherwise be entitled.
4
In this section “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.