Corporation Tax Act 2009 section 1092

SMEs: deemed trading loss for pre-trading expenditure

Section 1092 allows small or medium-sized enterprises (SMEs) to claim immediate tax relief on qualifying R&D expenditure incurred before trading begins, by treating it as a deemed trading loss.

• SMEs can elect to treat qualifying pre-trading R&D expenditure as a trading loss, enabling immediate relief rather than waiting until trading commences.
• The expenditure must meet a threshold test, which depends on how the pre-trading expenditure is allocated to accounting periods under the relevant rules.
• The mechanism is essentially the same as for trading companies — an election creates a deemed trading loss equal to the qualifying expenditure, which can then be relieved in the usual ways.
• Relief under this section is only available to companies that are liable to corporation tax.