Corporation Tax Act 2009 section 1118

"The notional relief"

Section 1118 defines the "notional R&D expenditure credit" used in the aid calculation formula under section 1114, by explaining how to determine the hypothetical R&D expenditure credit a small or medium-sized company would have received if it had been treated as a large company.

• The notional R&D expenditure credit is the total amount of R&D expenditure credit the claimant could have claimed under the large company R&D expenditure credit scheme (Chapter 6A of Part 3) across any accounting period, based on qualifying expenditure linked to the relevant research and development project.
• The calculation assumes the claimant had been a large company throughout the entire accounting period in question, even if in reality it was a small or medium-sized enterprise.
• Qualifying expenditure for this purpose means expenditure that, in the relevant accounting period, met the definition of qualifying Chapter 2 expenditure as set out in section 1051.
• This notional credit feeds into the formula in section 1114, which is used to determine the total R&D aid a company has received, ensuring compliance with state aid limits.