Amendments 7 and 8 to Schedule 1: R&D intensity ratio: Preventing double counting of amounts in total relevant expenditure
Published 29 January 2024
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Summary
- These amendments prevent the double-counting of amounts recharged between connected companies, and of amortisation of intangible fixed assets denied a tax deduction by s1308(5) CTA09, in the calculation of a company’s total relevant expenditure, thereby avoiding dilution of R&D intensity in certain situations contrary to the policy intention. They have effect in relation to enhanced support for R&D intensive SMEs.
Details of the amendments
2. Amendment 7 inserts a new subsection (5A) into new section 1045ZA to CTA09. Consequential amendment 8 amends new subsection 1045ZA(6).
3. Subsection (5A)(a) excludes from the calculation of total relevant expenditure any amount that consists of a payment or other transfer of value between connected companies.
4. Subsection (5A)(b) excludes from the calculation of total relevant expenditure any amount of amortisation denied a tax deduction by s1308(5), where a tax deduction has been taken under that section for capitalized R&D expenditure.
5. Subsection (6) is amended consequent to new subsection 5A(a), to ensure that an amount of R&D expenditure recharged to a connected company is not thereby excluded from the amount of relevant R&D expenditure.
Background note
6. These amendments prevent the double-counting of amounts recharged between connected companies, and of amortisation of intangible fixed assets denied a tax deduction by s1308(5) CTA09 in the calculation of a company’s total relevant expenditure, thereby avoiding dilution of R&D intensity in certain situations contrary to the policy intention.