Finance (No. 2) Act 2008

Amendment of section 766A (tax credit on expenditure on buildings or structures used for research and development) of Principal Act.

35.— (1) The Principal Act is amended in section 766A—

(a) in subsection (1)(a)—

(i) by inserting the following definition before the definition of “ refurbishment ” :

“ ‘ qualifying building ’ means a building or structure, which is to be used for the purpose of the carrying on by the company of research and development activities in a relevant Member State, where, for the specified relevant period in relation to that building or structure, the proportion of use of the building or structure attributable to the research and development activities carried on by the company, as calculated in accordance with subsection (6), is not less than 35 per cent;”,

(ii) in the definition of “ relevant expenditure ” by substituting “qualifying building” for “building or structure which is to be used wholly and exclusively for the purpose of the carrying on by the company of research and development activities in a relevant Member State”, and

(iii) by inserting the following definitions after the definition of “relevant expenditure”:

“ ‘ specified relevant expenditure ’ means the same proportion of relevant expenditure as the research and development activities carried on in the qualifying building by the company for the specified relevant period bears to the total of all activities carried on by the company in that building for that period;

‘ specified relevant period ’ means—

(i) in the case of the construction of a qualifying building, the period of 4 years, commencing with the date on which the building or structure is first brought into use for the purposes of a trade,

(ii) in the case of the refurbishment of a qualifying building, the period of 4 years, commencing with the date on which the refurbishment is completed or, such earlier period of 4 years, as the company may elect, beginning not earlier than the date on which the refurbishment commences;”,

(b) by substituting for subsection (2):

“(2) Where in an accounting period a qualified company incurs relevant expenditure, the corporation tax of the company for that accounting period shall be reduced by an amount equal to 25 per cent of the specified relevant expenditure.”,

(c) by substituting for subsection (3):

“(3) Where—

(a) in an accounting period a company incurs relevant expenditure on a building or structure,

(b) in relation to that expenditure the corporation tax of the company or another company is reduced under subsection (2) or (4A), or a payment has been made to the company or another company by the Revenue Commissioners by virtue of subsection (4B), and

(c) at any time in the period of 10 years commencing at the beginning of that accounting period the building or structure is sold or ceases to be used by the company for the purpose of research and development activities or for the purpose of the same trade that was carried on by the company at the beginning of the specified relevant period, in connection with which the research and development activities were carried on,

then the company—

(i) and in relation to that expenditure, another company, shall not be entitled to reduce corporation tax under subsection (2) for any accounting period ending after the time specified in paragraph (c), and

(ii) shall be charged to tax under Case IV of Schedule D for the accounting period in which the building or structure is sold or ceases to be used for the purpose of research and development activities or for the purpose of the trade, in an amount equal to 4 times the aggregate amount by which, in respect of the company or in relation to that expenditure, another company, the corporation tax payable is reduced under subsections (2), (4) and (4A), and payments are made under subsection (4B).”,

(d) in subsection (4)(a) by inserting “and subsections (4A) and (4B),” after “(c)”,

(e) by inserting the following after subsection (4):

“(4A) (a) Where as respects any accounting period of a company the amount by which the company is entitled to reduce corporation tax of the accounting period exceeds the corporation tax of the company for the accounting period, the company may make a claim requiring the corporation tax of the preceding accounting periods ending within the time specified in paragraph (b) to be reduced by the amount of the excess.

(b) The time referred to in paragraph (a) shall be a time immediately preceding the accounting period first mentioned in that paragraph, equal in length to that accounting period, but the amount of the reduction which may be made under that paragraph in the corporation tax of an accounting period falling partly before that time shall not exceed the corporation tax referable to the part of those profits proportionate to the part of the period falling within that time.

(4B) (a) Where a claim under subsection (4A)(a) has been made, and the amount of the excess referred to in subsection (4A)(a) exceeds the corporation tax of the preceding accounting periods ending within the time specified in subsection (4A)(b) or where no corporation tax arises for those preceding accounting periods, the company may make a claim to have any excess remaining paid to the company by the Revenue Commissioners.

(b) Subject to section 766B, on receipt of a claim the Revenue Commissioners shall pay any excess remaining to the company, in 3 instalments—

(i) the first instalment shall be paid by the Revenue Commissioners not earlier than the date provided for in paragraph (b) of the definition of ‘specified return date for the chargeable period’ as defined in section 950(1), for the accounting period in which the expenditure on research and development was incurred and shall equal 33 per cent of the excess remaining,

(ii) in respect of the second instalment—

(I) the excess remaining, as reduced by the first instalment under subparagraph (i), shall be first treated as an amount by which the corporation tax of the accounting period next succeeding the accounting period in which the expenditure giving rise to the claim under this subsection was incurred, is reduced in accordance with subsection (4), and

(II) the second instalment shall be paid by the Revenue Commissioners not earlier than 12 months immediately following the date referred to in sub- subparagraph (i) and shall equal 50 per cent of the amount by which the excess remaining is reduced by the aggregate of the first instalment under subparagraph (i) and the amount treated as reducing the corporation tax of an accounting period under clause (I),

and

(iii) in respect of the last instalment—

(I) the excess remaining, as reduced by the first and second instalments and by the amount treated as reducing the corporation tax of an accounting period under clause (I) of subparagraph (ii), shall be first treated as an amount by which the corporation tax of the accounting period next succeeding the accounting period referred to in clause (I) of subparagraph (ii) is reduced in accordance with subsection (4), and

(II) the last instalment shall be paid by the Revenue Commissioners not earlier than 24 months immediately following the date referred to in subparagraph (i) and shall equal the amount by which the excess remaining is reduced by the first and second instalments and by the total of the amounts by which the corporation tax of an accounting period is reduced under clause (I) of subparagraph (ii) and under clause (I) of this subparagraph.”,

(f) by substituting for subsection (5):

“(5) Any claim under this section shall be made within 12 months from the end of the accounting period in which the relevant expenditure, giving rise to the claim, is incurred.”,

and

(g) by inserting the following after subsection (5):

“(6) (a) Where expenditure is incurred by a company on a building or structure and the building or structure will not be used by the company wholly and exclusively for the purposes of research and development, the proportion of the use of the building or the amount of the expenditure, attributable to research and development shall be such portion of the use of the building or the expenditure as appears to the inspector (or on appeal the Appeal Commissioners) to be just and reasonable.

(b) Where, at any time, any apportionment referred to in paragraph (a), or a further apportionment made under this paragraph, ceases to be just and reasonable, then—

(i) such further apportionment shall be made at that time as appears to the inspector (or on appeal the Appeal Commissioners) to be just and reasonable,

(ii) any such further apportionment shall supersede any earlier apportionment, and

(iii) any such adjustments, assessments or repayments of tax shall be made as are necessary to give effect to any apportionment under this subsection.

(7) Any amount payable by virtue of subsection (4B) shall not be income of the company or another company, for any tax purpose.

(8) Any amount payable by the Revenue Commissioners to the company or another company by virtue of subsection (4B) shall be deemed to be an overpayment of corporation tax, for the purposes only of section 1006A (2).”.

(2) (a) Paragraph (f) of subsection (1) applies to claims under section 766A of the Principal Act made on or after 1 January 2009.

(b) Except where otherwise expressly provided, this section comes into operation on such day or days as the Minister for Finance may by order or orders appoint, and different days may be appointed for different purposes or different provisions.