Corporation Tax Act 2009 section 1042M

Priority of discharge

Section 1042M establishes which R&D expenditure credit amounts must be used first when a company has more than one type of credit available to offset against the same corporation tax liability.

• When a company has both a notional tax deduction (from section 1042L) and an R&D expenditure credit amount (from step 4 in section 1042I) available to set against the same corporation tax liability, the notional tax deduction must be applied first.
• The same priority rule applies where amounts have been surrendered within a group — surrendered notional tax deductions take priority over surrendered expenditure credit amounts.
• The expenditure credit amount (or a group-surrendered expenditure credit amount) can only be applied against a corporation tax liability after the notional tax deduction amounts have been fully utilised against that same liability.
• This ordering rule ensures a consistent and predictable sequence when multiple R&D-related credits are available to reduce the same corporation tax bill.