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Finance Bill
Schedule 30 — First-year allowances for expenditure on environmentally beneficial plant or machinery

    367

 

                    (d)                   in the case of plant or machinery used or for use in Northern

Ireland, by the Department of Enterprise, Trade and

Investment in Northern Ireland or a person authorised by it.

              (4)             If a certification of environmental benefit is revoked—

                    (a)                   the certificate is treated for the purposes of this section as if it

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had never been issued, and

                    (b)                   all such assessments and adjustments shall be made as are

necessary as a result of the revocation.

              (5)             If a person who has made a tax return becomes aware that, as a result

of the revocation of a certificate of environmental benefit after the

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return was made, the return has become incorrect, he must give

notice to the Inland Revenue specifying how the return needs to be

amended.

              (6)             The notice must be given within three months beginning with the

day on which the person first became aware that anything in the tax

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return had become incorrect because of the revocation of the

certificate.

       45J     Environmentally beneficial components of plant or machinery

              (1)             This section applies for the purpose of apportioning expenditure

incurred on plant or machinery where one or more of the

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components of the plant or machinery (but not all of it) is of a

description specified by Treasury order under section 45H(3).

              (2)             If—

                    (a)                   only one of the components is of such a description, and

                    (b)                   an amount is specified by the order in respect of that

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component,

                              the part of the expenditure that is section 45H expenditure must not

exceed that amount.

              (3)             If—

                    (a)                   more than one of the components is of such a description, and

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                    (b)                   an amount is specified by the order in respect of each of those

components,

                              the part of the expenditure that is section 45H expenditure must not

exceed the total of those amounts.

              (4)             If the expenditure is treated under this Act as incurred in

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instalments, the proportion of each instalment that is section 45H

expenditure is the same as the proportion of the whole expenditure

that is section 45H expenditure.

              (5)             Where this section applies, the expenditure is not apportioned under

section 562(3) (apportionment where property sold with other

40

property).

              (6)             In this section “section 45H expenditure” means expenditure that is

first-year qualifying expenditure under section 45H.”.

 

 

Finance Bill
Schedule 30 — First-year allowances for expenditure on environmentally beneficial plant or machinery

    368

 

General exclusions affecting first-year qualifying expenditure

  4       (1)      In section 46(1)—

              (a)             after “under” insert “any of the following provisions”;

              (b)             at the end of the entry relating to section 45E, omit “or”;

              (c)             after the entry relating to section 45F add—

5

 

“section 45H

expenditure on environmentally beneficial

 
  

plant or machinery.”.

 

          (2)               In section 46(5) for “or 45E” substitute “, 45E or 45H”.

Amount of first-year allowances

  5        In section 52(3), in the Table, after the entries relating to expenditure

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qualifying under section 45F add—

 

“Expenditure qualifying under section 45H

100%”.

 
 

(expenditure on environmentally beneficial

  
 

plant or machinery)

  

Penalty for failure to provide information etc

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  6        In the second column of the Table in section 98 of the Taxes Management Act

1970 (c. 9) (penalty for failure to provide information etc), in the entry

relating to requirements imposed by the Capital Allowances Act 2001 (c. 2),

after “45G(5) and (6)” insert “, 45I(5) and (6)”.

Transitory provision: expenditure incurred etc before first order made

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  7       (1)      For the purposes of section 45H(2) of the Capital Allowances Act 2001,

where—

              (a)             expenditure on plant or machinery is incurred, or a contract for the

provision of plant or machinery is entered into, before the first order

is made under section 45H(3) of that Act, and

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              (b)             if that order had been made before the relevant time, the conditions

in section 45H(3) of that Act would have been met,

                   those conditions shall be treated as if they were met at the relevant time.

          (2)      In sub-paragraph (1) “the relevant time” means the time when the

expenditure was incurred or (as the case may be) the contract was entered

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into.

 

 

Finance Bill
Schedule 31 — Tax relief for expenditure on research and development
Part 1 — Small and medium-sized enterprises: Schedule 20 to Finance Act 2000

    369

 

Schedule 31

Section 168

 

Tax relief for expenditure on research and development

Part 1

Small and medium-sized enterprises: Schedule 20 to Finance Act 2000

Introductory

5

  1        Schedule 20 to the Finance Act 2000 (c. 17) (tax relief for expenditure on

research and development by small and medium-sized enterprises) is

amended in accordance with the following provisions of this Part of this

Schedule.

Required minimum aggregate expenditure: reduction from £25,000 to £10,000

10

  2       (1)      Paragraph 1 (entitlement to R&D tax relief) is amended as follows.

          (2)      In sub-paragraph (1)(b) (requirement for minimum aggregate expenditure

of £25,000 or time apportioned part of that amount) in sub-paragraphs (i)

and (ii) for “£25,000” substitute “£10,000”.

Required minimum aggregate expenditure: inclusion of new class of expenditure

15

  3       (1)      Paragraph 1 is also amended as follows.

          (2)      In sub-paragraph (1)(b) (requirement for minimum aggregate

expenditure)—

              (a)             for “paragraph 3) and” substitute “paragraph 3),”; and

              (b)             after “Finance Act 2002)” insert “and its qualifying additional SME

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expenditure (as defined in paragraph 10B of that Schedule)”.

          (3)      In sub-paragraph (3A) (meaning of “deductible” in relation to qualifying

sub-contracted R&D expenditure)—

              (a)             after “(1)(b)” insert “, each of the following—

                           (a)”;                             

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              (b)             after “Finance Act 2002)” insert “, and”; and

              (c)             after the paragraph (a) so formed, insert the following paragraph—

                           “(b)                             a company’s qualifying additional SME expenditure

(as defined in paragraph 10B of that Schedule),”.

Qualifying R&D expenditure: expenditure on externally provided workers

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  4        In paragraph 3 (qualifying R&D expenditure) for sub-paragraph (4) (the

third condition, that the expenditure is incurred on staffing costs or

consumable stores or is qualifying expenditure on sub-contracted research

and development) substitute—

                           “(4)                  The third condition is that the expenditure—

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                      (a)                     is incurred on staffing costs (see paragraph 5),

                      (b)                     is incurred on consumable stores (see paragraph 6),

                      (c)                     is qualifying expenditure on externally provided workers

(see paragraphs 8A to 8E), or

 

 

Finance Bill
Schedule 31 — Tax relief for expenditure on research and development
Part 1 — Small and medium-sized enterprises: Schedule 20 to Finance Act 2000

    370

 

                      (d)                     is qualifying expenditure on sub-contracted research and

development (see paragraphs 9 to 12).”.

Staffing costs: persons partly engaged directly and actively in relevant R&D

  5       (1)      In paragraph 5 (staffing costs) sub-paragraph (3) (person partly engaged in

relevant research and development) is amended as follows.

5

          (2)      In the opening words, omit “the following rules apply”.

          (3)      Omit paragraphs (a) and (b) (person spending less than 20% or more than

80%of total working time on relevant research and development).

          (4)      In paragraph (c), omit “in any other case,”.

Qualifying expenditure on externally provided workers

10

  6        After paragraph 8 (subsidised expenditure) insert—

“Qualifying expenditure on externally provided workers

          8A                 (1)                  The provisions of paragraphs 8C to 8E have effect for determining

the amount of the qualifying expenditure of a company (“the

company”) on externally provided workers.

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                           (2)                  The provisions of sub-paragraphs (4) to (6) have effect for

determining how much of any such expenditure is attributable to

relevant research and development.

                           (3)                  For the purposes of this Schedule the company incurs expenditure

on externally provided workers if it makes a payment (a “staff

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provision payment”) to another person (the “staff provider”) in

respect of the supply to the company, by or through the staff

provider, of the services of any externally provided workers.

                           (4)                  Qualifying expenditure on externally provided workers is

attributable to relevant research and development if the externally

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provided workers are directly and actively engaged in such

research and development.

                           (5)                  In the case of any externally provided worker partly engaged

directly and actively in relevant research and development, an

appropriate proportion of the qualifying expenditure relating to

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him is treated as attributable to the relevant research and

development.

                           (6)                  For the purposes of sub-paragraphs (4) and (5) persons who

provide services, such as secretarial or administrative services, in

support of activities carried on by others, are not, by virtue of

35

providing those services, to be treated as themselves directly and

actively engaged in those activities.

Meaning of “externally provided worker”

          8B                                   For the purposes of this Schedule a person is an “externally

provided worker” in relation to the company if the following

40

conditions are satisfied—

                      (a)                     he is an individual,

 

 

Finance Bill
Schedule 31 — Tax relief for expenditure on research and development
Part 1 — Small and medium-sized enterprises: Schedule 20 to Finance Act 2000

    371

 

                      (b)                     he is not a director or employee of the company,

                      (c)                     he personally provides, or is under an obligation

personally to provide, services to the company,

                      (d)                     he is subject to (or to the right of) supervision, direction or

control by the company as to the manner in which those

5

services are provided,

                      (e)                     his services are supplied to the company by or through the

staff provider (whether or not he is a director or employee

of the staff provider or of any other person),

                      (f)                     he provides, or is under an obligation to provide, those

10

services personally to the company under the terms of a

contract between him and the staff provider,

                      (g)                     the provision of those services does not constitute the

carrying on of activities contracted out by the company.

Treatment of expenditure where company and staff provider are connected persons

15

          8C                 (1)                  Where—

                      (a)                     the company and the staff provider are connected persons,

and

                      (b)                     in accordance with generally accepted accounting

practice—

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                             (i)                            the whole of the staff provision payment has been

brought into account in determining the staff

provider’s profit or loss for a relevant period, and

                             (ii)                           all of the staff provider’s relevant expenditure has

been so brought into account,

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                                             the whole of the payment (up to the amount of the staff provider’s

relevant expenditure) is qualifying expenditure on externally

provided workers.

                           (2)                  In sub-paragraph (1)—

                      (a)                     references to the “relevant expenditure” of the staff

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provider are to expenditure that—

                             (i)                            is incurred by the staff provider in providing for

the company the externally provided workers to

which the staff provision payment relates,

                             (ii)                           is not of a capital nature, and

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                             (iii)                          is incurred on staffing costs or agency workers’

remuneration;

                      (b)                     a “relevant period” means a period—

                             (i)                            for which accounts are drawn up for the staff

provider, and

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                             (ii)                           that ends not more than twelve months after the

end of the company’s period of account in which

the staff provision payment is, in accordance with

generally accepted accounting practice, brought

into account in determining the company’s profit

45

or loss.

                           (3)                  Paragraph 5 (staffing costs) applies for the purposes of

determining whether the staff provider’s expenditure meets the

 

 

Finance Bill
Schedule 31 — Tax relief for expenditure on research and development
Part 1 — Small and medium-sized enterprises: Schedule 20 to Finance Act 2000

    372

 

requirements of sub-paragraph (2)(a)(iii) so far as relating to

staffing costs.

                                             For this purpose the references in that paragraph to a company

shall be read as references to the staff provider.

                           (4)                  For the purposes of this Schedule “agency workers’

5

remuneration”, in the case of any person who is an externally

provided worker in relation to the company, means remuneration

receivable by the worker under or in consequence of the contract

mentioned in paragraph 8B(f)—

                      (a)                     that does not constitute employment income of the worker

10

apart from Chapter 7 of Part 2 of the Income Tax (Earnings

and Pensions) Act 2003 (c. 1) (application of provisions to

agency workers), and

                      (b)                     that is not, apart from section 134 of the Taxes Act 1988

(workers supplied by agencies), chargeable to income tax

15

under Schedule E.

                           (5)                  Any apportionment of expenditure of the company or the staff

provider necessary for the purposes of this paragraph shall be

made on a just and reasonable basis.

Election for connected persons treatment

20

          8D                 (1)                  The company and the staff provider may in any case jointly elect

that paragraph 8C shall apply to the staff provision payments

made by the company to the staff provider.

                           (2)                  Any such election must be made in relation to all staff provision

payments paid under the same contract or arrangement.

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                           (3)                  The election must be made by notice in writing given to the Inland

Revenue.

                           (4)                  The notice must be given before the end of the period of two years

beginning with the end of the company’s accounting period in

which the contract or other arrangement is entered into.

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                           (5)                  An election under this paragraph, once made, is irrevocable.

Treatment of staff provision payment in other cases

          8E                  Where—

                      (a)                     the company makes a staff provision payment,

                      (b)                     the company and the staff provider are not connected

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persons, and

                      (c)                     no election is made under paragraph 8D,

                            65% of the amount of the staff provision payment is treated as

qualifying expenditure on externally provided workers.”.

Qualifying expenditure on sub-contracted R&D: externally provided workers

40

  7       (1)      Paragraph 10 (treatment of qualifying expenditure on sub-contracted

research and development where company and sub-contractor are

connected persons) is amended as follows.

 

 

Finance Bill
Schedule 31 — Tax relief for expenditure on research and development
Part 3 — Work sub-contracted to SMEs: Part 2 of Schedule 12 to Finance Act 2002

    373

 

          (2)      In sub-paragraph (2)(a) (relevant expenditure of sub-contractor) in sub-

paragraph (iii) after “on consumable stores” insert “or is qualifying

expenditure on externally provided workers”.

          (3)      For sub-paragraph (3) (which applies paragraphs 5 and 8) substitute—

                           “(3)                  For the purpose of determining whether the sub-contractor’s

5

expenditure meets the requirements of sub-paragraph (2)(a)(iii)

and (iv), the following provisions apply—

                      (a)                     paragraph 5 (staffing costs),

                      (b)                     paragraph 8 (subsidised expenditure), and

                      (c)                     paragraphs 8A to 8E (qualifying expenditure on externally

10

provided workers),

                                             but for that purpose the references in those paragraphs to a

company shall be read as references to the sub-contractor.”.

Part 2

Large companies: Part 1 of Schedule 12 to Finance Act 2002

15

Introductory

  8        Part 1 of Schedule 12 to the Finance Act 2002 (c. 23) (entitlement to R&D

relief: large companies) is amended in accordance with the following

provisions of this Part of this Schedule.

Required minimum aggregate expenditure: reduction from £25,000 to £10,000

20

  9       (1)      Paragraph 1 (entitlement to relief under Part 1 of the Schedule) is amended

as follows.

          (2)      In sub-paragraph (1)(b) (requirement for minimum qualifying R&D

expenditure of £25,000 or time apportioned part of that amount) in sub-

paragraphs (i) and (ii) for “£25,000” substitute “£10,000”.

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Qualifying expenditure on externally provided workers

  10       In paragraph 4 (qualifying expenditure on direct research and development)

for sub-paragraph (3) (the second condition, that the expenditure is incurred

on staffing costs or consumable stores) substitute—

                           “(3)                  The second condition is that the expenditure—

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                      (a)                     is incurred on staffing costs,

                      (b)                     is incurred on consumable stores, or

                      (c)                     is qualifying expenditure on externally provided

workers.”.

Part 3

35

Work sub-contracted to SMEs: Part 2 of Schedule 12 to Finance Act 2002

Introductory

  11       Part 2 of Schedule 12 to the Finance Act 2002 (entitlement to relief for R&D

expenditure: work sub-contracted to small or medium-sized enterprise) is

 

 

 
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