Section 1045ZA | R&D intensity condition ^F1

(1)This section determines whether a company meets the R&D intensity condition in an accounting period for the purposes of sections 1044 and 1045.

(2)If the company is not connected with another company, the company meets the condition if its relevant R&D expenditure for the period amounts to at least 30% of its total relevant expenditure for the period.

(3)If the company is connected with at least one other company, the company meets the condition if the connected companies’ relevant R&D expenditure for the period amounts to at least 30% of the connected companies’ total relevant expenditure for the period.

(4)In subsection (3), “the connected companies” refers to the company to which this section is being applied and each company with which it is connected; and the references to their expenditure are to the aggregate of each of their expenditures.

(5)Expenditure forms part of a company’s total relevant expenditure for an accounting period if—

(a)in accordance with generally accepted accounting practice, it is brought into account in calculating the profits for the period of any trade carried on by the company,

(b)it is expenditure in respect of which the company is, for the period, entitled to relief under section 1045, or

(c)in reliance on section 1308(2) (expenditure brought into account in determining value of intangible asset allowable as a deduction), it is brought into account in calculating the company’s profits for the period for corporation tax purposes.

(6)But—

(a)expenditure of a company is to be ignored for the purposes of subsection (5) if it consists of a payment, or other transfer of value, to another company with which the company is connected, and

(b)where expenditure forms part of a company's total relevant expenditure by virtue of subsection (5)(c), a deduction brought into account as mentioned in subsection (5)(a) is to be ignored for the purposes of that provision to the extent that a corresponding deduction for corporation tax purposes is prevented by section 1308(5).

(7)Expenditure forms part of a company’s relevant R&D expenditure for an accounting period if—

(a)it forms part of the company’s total relevant expenditure for the period, or would do but for subsection (6)(a), and

(b)it is expenditure in respect of which the company would, assuming that it met the R&D intensity condition, be entitled to relief under this Chapter for the period.

(8)For the purposes of this section in its application to an accounting period, a company is to be treated as connected with another company if it is connected with that company on any day within the period.