Finance Act 2024

Part 3 Commencement and transitional and transitory provision

General commencement of Parts 1 and 2

16 (1) The amendments made by this Schedule, except those made by sub-paragraphs (16) to (18) of paragraph 9, have effect in relation to accounting periods beginning on or after the appointed day.

(2) In this Part, the “appointed day” is a day appointed by the Treasury in regulations.

Assignments and nominations

17 (1) The amendment made by paragraph 9(16) does not have effect in relation to—

(a) an assignment made before 22 November 2023,

(b) an agreement made before that date, or

(c) an assignment made on or after that date to carry out an agreement made before that date.

(2) The amendment made by paragraph 9(17) has effect only in relation to claims made on or after 1 April 2024.

Avoidance of overlaps and gaps in entitlement during transition

18 (1) Sub-paragraphs (2) and (3) apply if, but for those sub-paragraphs—

(a) one company (“company A”) would be entitled to old R&D relief, and

(b) another company (“company B”) would be entitled to new R&D relief,

in respect of expenditure attributable to the same research and development.

(2) If company B would have been entitled to old R&D relief in respect of its expenditure had the Part 1 amendments not been made, only company B is entitled to the relief.

(3) In any other case, only company A is entitled to the relief.

(4) Sub-paragraph (5) applies if—

(a) a company incurs pre-commencement expenditure,

(b) the company is not entitled to old R&D relief in respect of the expenditure, and

(c) had the expenditure been post-commencement expenditure, it would have been—

(i) qualifying Chapter 1A expenditure by virtue of section 1042E of CTA 2009 or section 1042F of that Act as it refers to section 1042E, or

(ii) qualifying Chapter 2 expenditure by virtue of section 1053 of CTA 2009 (as it has effect after the Part 1 amendments) or section 1053A of that Act as it refers to section 1053.

(5) The company is to be treated as satisfying sections 1042F(4) and 1053A(4) of CTA 2009 for the purposes of ascertaining the entitlement of another company to new R&D relief in respect of expenditure attributable to the same research and development as the expenditure mentioned in sub-paragraph (4).

(6) Sub-paragraph (7) applies if—

(a) in respect of pre-commencement expenditure attributable to research and development, one company (“company C”)—

(i) is not entitled to old R&D relief, but

(ii) would be so entitled if none of sections 104C(2), 104G(5), 104H(6), 104J(4), 104K(5), 104L(4), 1052(5) and 1053(4) of CTA 2009 (as they have effect before the Part 1 amendments) applied, and

(b) in respect of post-commencement expenditure attributable to the same research and development, another company (“company D”) would, had the expenditure been pre-commencement expenditure, have been entitled to old R&D relief by virtue of section 1053 of CTA 2009 (as it has effect before the Part 1 amendments).

(7) For the purpose of ascertaining the entitlement of company D to new R&D relief, the research and development is to be treated as contracted out by company D within the meaning of section 1133 of CTA 2009 (as it has effect after the Part 1 amendments).

(8) In this paragraph—

• “the new R&D provisions” means Part 13 of CTA 2009 as it has effect after the Part 1 amendments;

• “new R&D relief” means relief under the new R&D provisions;

• “the old R&D provisions” means Chapter 6A of Part 3 or Part 13 of CTA 2009 as that Chapter or Part has effect before the Part 1 amendments;

• “old R&D relief” means relief under the old R&D provisions;

• “the Part 1 amendments” means the amendments made by Part 1 of this Schedule;

• “post-commencement expenditure” means expenditure incurred in an accounting period beginning on or after the appointed day;

• “pre-commencement expenditure” means expenditure incurred in an accounting period beginning before the appointed day.

Transitional provision relating to claim notifications

19 The reference in section 1142B of CTA 2009 (as amended by paragraph 9(15)) to claims under section 1042C of that Act is to be read as including claims under section 104A of that Act before its repeal by paragraph 2.

Transitional provision relating to the R&D intensity condition

20 The references in sections 1044(2A)(b) and 1045(2A)(b) of CTA 2009 (inserted by paragraph 6(4) and (5)) to having met the R&D intensity condition in an accounting period—

(a) include having met the R&D intensity condition for the purposes of paragraph 21 in an accounting period to which that paragraph applies, but

(b) are not applicable to any other accounting period beginning before the appointed day.

Higher rate of payable credit for R&D-intensive SMEs from 1 April 2023

21 (1) Sub-paragraph (2) applies if, in an accounting period beginning before the appointed day but ending on or after 1 April 2023, a company—

(a) has a Chapter 2 surrenderable loss, and

(b) meets the R&D intensity condition.

(2) The amount of R&D tax credit to which the company is entitled for the period is to be determined as if the amendment made by section 4(3)(d) of FA 2023 (reduction in rate of credit from 14.5% to 10%) had not been made.

(3) Subsections (2) to (7) of section 1045ZA of CTA 2009, as inserted by paragraph 6(6), determine whether a company meets the R&D intensity condition in an accounting period for the purposes of sub-paragraph (1)(b).

(4) But subsections (2) and (3) of that section are to be read for the purposes of sub-paragraph (3) as if “40%” appeared instead of “30%”.

(5) In this paragraph, “Chapter 2 surrenderable loss” and “R&D tax credit” have the same meanings as in Chapter 2 of Part 13 of CTA 2009 (see sections 1054 and 1055 of that Act).