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.^F1

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

(2A)Condition B is that the company—^F2

(a)meets the R&D intensity condition in the period, or^F2

(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.^F2

(3)Repealed^F3

(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).^F4

(5)For the company to obtain the relief it must make an election (see section 1047, and also section 1112F)....^F5F6

(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.^F7

(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(9)Repealed^F8

(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.