Corporation Tax Act 2009 section 1042N

Amounts surrendered to other group companies

Section 1042N explains what happens when a company surrenders part of its R&D expenditure credit to another member of the same group, and how that surrendered amount is applied against the receiving company's corporation tax liability.

• A qualifying company may surrender some or all of its R&D expenditure credit to another company in the same group, either at the expenditure credit redemption stage or at the notional tax deduction stage.
• The surrendered amount is matched to the receiving company's overlapping accounting periods using a time-apportionment method, and is applied to discharge that company's corporation tax liability for each overlapping period, up to the proportionate tax due.
• If any surrendered amount remains after being applied against all overlapping periods of the receiving company, the unused remainder is treated as if it had never been surrendered and reverts to the qualifying company for further processing.
• The surrender itself is tax-neutral: it does not affect the profits or losses of either company for corporation tax purposes, nor is it treated as a distribution.