Introduction Background
33.Additional relief for expenditure by a large company on research and development is currently given as a super-deduction against corporation tax profits reducing the amount of tax payable.
34.To encourage more research and development by large companies it is proposed to replace the current deduction system with a payable credit (the ATL credit) to all large companies including those who have no liability to corporation tax. This will make the benefits more visible and certain.
35.The ATL credit applies for qualifying expenditure incurred on or after 1 April 2013 and will be introduced along side the existing super-deduction and will replace it in April 2016.
36.The underlying rules for identifying qualifying activity and calculating qualifying expenditure remain unchanged and the new credit will be calculated as a percentage by reference to the amount of qualifying expenditure on R&D.
37.The ATL credit will be a taxable receipt and will be paid net of tax to companies with no corporation tax liability.
38.The ATL credit will be paid at a higher percentage rate to companies in the ring fence to reflect the higher rate of tax paid by those companies and to reflect the current levels received under the super-deduction.
39.In calculating the payable element, the credit will be used firstly to reduce the corporation tax liability of the claimant company for the same accounting period.
40.Any payable element will then be limited by the PAYE/NIC liabilities of the company’s R&D staff and those of Externally Provided Workers from group companies. Any amount above the cap may be carried forward to be treated as a credit for the following year.
41.If a claim is made, the payable element (after the PAYE/NIC cap has been applied) will be available to discharge any corporation tax liabilities of other accounting periods of the claimant company or the corporation tax liability of other group companies.
42.The balance after the cap and discharging of liability will be payable but under deduction of an amount equal to corporation tax at the full company rate applying for the accounting period (including the main rate and supplementary charge for ring fence trades) but subject to discharging any other liability of the company to the Commissioners.
43.Any notional tax retained will be carried forward and be available to discharge the claimant company’s liability in preference to any ATL credit for the following year.