Corporation Tax Act 2009 section 1042J

Treatment of deduction to comply with PAYE and NIC limit

Section 1042J explains what happens to any amount deducted from the R&D expenditure credit because of the PAYE and NIC cap.

• When a deduction is made at step 3 of the credit calculation (section 1042I) to comply with the PAYE and NIC limit, the deducted amount is not lost
• The deducted amount is carried forward and added to the company's R&D expenditure credit for the next accounting period
• This carry-forward applies even if the company would otherwise have no R&D expenditure credit in that next period
• The effect is that excess credit restricted by the PAYE/NIC cap is preserved and rolled into the following period rather than forfeited