Section 1045 | Alternative treatment for pre-trading expenditure: deemed trading loss

(1)A company is entitled to corporation tax relief for an accounting period if it meets each of conditions A to D.

(2)Condition A is that the company is a small or medium-sized enterprise in the period.

(2A)Condition B is that the company—

(a)meets the R&D intensity condition in the period, or

(b)obtained relief under this Chapter for its most recent prior accounting period of 12 months’ duration, having met the R&D intensity condition in that period.

(3)Repealed

(4)Condition C is that the company has incurred qualifying Chapter 2 expenditure in the period which—

(a)is not allowable as a deduction in calculating for corporation tax purposes the profits of a trade carried on by it at the time the expenditure was incurred, but

(b)would have been so allowable had it, at that time, been carrying on a trade consisting of the activities in respect of which the expenditure was incurred.

(4A)Condition D is that the company is not an ineligible company (see section 1142).

(5)For the company to obtain the relief it must make an election (see section 1047, and also section 1112F)....

(6)The relief is that the company is treated as if it had made a trading loss in the period.

(7)The trading loss is equal to 186% of the qualifying Chapter 2 expenditure.

(8)If a company makes an election under this section in respect of qualifying Chapter 2 expenditure, section 61 (pre-trading expenses) does not apply to the expenditure.

(9)Repealed

(10)For the meaning of “qualifying Chapter 2 expenditure” see section 1051.

(11)See also section 1137, which makes provision about the accounting periods of a company which is not within the charge to corporation tax.