Corporation Tax Act 2009 section 1042I

Redemption of value of expenditure credit

Section 1042I sets out the step-by-step process by which a company's R&D expenditure credit is applied once it has been claimed for an accounting period.

• The credit is first used to pay off the company's corporation tax liability for the same accounting period, then reduced by a notional tax deduction and capped by reference to the company's PAYE and NIC liabilities.
• Any remaining balance is applied against the company's corporation tax liabilities for other accounting periods, and group members may also receive a surrender of part or all of any surplus.
• If a balance still remains, it is used to discharge any other amounts the company owes to HMRC, whether under legislation or related agreements.
• After all these steps, any amount still left over is paid in cash to the company by HMRC, subject to certain safeguards.