Revenue Note for Guidance

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Revenue Note for Guidance

769I Corporation tax referable to a specified trade

This section sets out how to calculate the relief available to a company which meets the conditions set out in this chapter.

The formula

(1) The formula by which the ‘qualifying profits’ (being the amount with reference to which the relief is calculated) are calculated is:

QE + UE

X

QA

OE

where –

QE is the qualifying expenditure on the qualifying asset,

UE is the uplift expenditure,

OE is the overall expenditure on the qualifying asset, and

QA is the profit of the specified trade relevant to the qualifying asset before taking account of the deduction available under subsection (5).

(2) Making a claim

(a) Where a relevant company (as defined) makes qualifying profits (as defined) in the course of a specified trade (as defined), then that company may make a claim in its CT1 in relation to a qualifying asset (or family of assets as appropriate).

(b) Such a claim must be made only once in respect of each qualifying asset and must be made within 24 months from the end of the accounting period to which the claim relates.

(c) The claim is a lifetime claim, in that it continues until such time as the invention underlying the qualifying asset is disposed of or ceases to be used.

The profits of the specified trade

(3) A specified trade must be treated for the purposes of this Chapter, Chapter 2 of Part 8, Chapter 3 of Part 12 and Part 41A, as a separate trade distinct from any other trade carried on by the company.

(4)(a) The overall income from qualifying assets is the income of the specified trade.

Any expenses laid out or expended in earning the overall income from the qualifying assets must be attributed to the specified trade. This will require that certain apportionments are made. These should be done in such a way as to treat the specified trade as a separate and distinct trade carried on by a company dealing at arm’s length.

(b) The methods of apportionment should be consistent, taking one year with another.

(5) A company entitled to claim relief under this Chapter gets an allowance calculated as 50% of its qualifying profits. This allowance is the last allowance given as a trading expense in computing the profits of the trade subject to corporation tax (that is, after capital allowances etc.)

Using an expert

(6)(a) Revenue may consult with an expert on whether or not:

  1. expenditure is qualifying expenditure on the qualifying asset;
  2. expenditure is overall expenditure on the qualifying asset;
  3. income is overall income from the qualifying asset;
  4. intellectual property is, or forms part of, a qualifying asset;
  5. any apportionment is done on a just and reasonable basis;
  6. arm’s length values have been correctly determined; or
  7. a patent granted without a substantive examination meets the patentability criteria and would have been granted had such an examination been carried out.

(b) Certain taxpayer protections are included in relation to Revenue’s right to consult an expert. Before disclosing information to any expert, notice must be given to the company of–

  1. the intention to disclose information to an expert,
  2. the information that will be disclosed,
  3. the identity of the expert whom the officer intends to consult,

and the company has a period of 30 days after the date of the notice to show that disclosure of the information could prejudice the company’s trade or business. If an officer is not satisfied that the disclosure would be prejudicial, that officer can give the company 30 days notice of the officer’s intention to consult the expert. A company can appeal that decision to the Appeal Commissioners within 30 days from the date of that decision.

Relevant Date: Finance Act 2021