Corporation Tax Act 2009 section 1112

Artificially inflated claims for relief

Section 1112 prevents companies from claiming research and development (R&D) tax relief or R&D tax credits where the amount of the claim has been artificially inflated through contrived transactions.

• If a transaction or arrangement is designed to artificially increase the amount of R&D relief or R&D tax credit a company can claim, the inflated portion of the relief will be denied.
• The rule applies broadly to any scheme, arrangement or understanding, whether or not it is legally enforceable, that has the effect of boosting relief beyond what would otherwise be available.
• Only the artificially inflated portion of the claim is denied — any genuine underlying R&D expenditure that legitimately qualifies for relief remains unaffected.
• This is an anti-avoidance measure intended to ensure that R&D tax incentives are used for their intended purpose and not exploited through artificial or contrived arrangements.

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