Corporation Tax Act 2010 section 357BLH

R&D fraction: increase for exceptional circumstances

Section 357BLH allows a company to elect to increase its R&D fraction for a sub-stream where exceptional circumstances have caused that fraction to fall below the true value attributable to the company's own research and development efforts.

• A company may elect to increase its R&D fraction where, before the increase, it is at least 0.325 but has fallen below the "value fraction" due to exceptional circumstances
• The increase equals the difference between the R&D fraction (before the increase) and the value fraction, effectively topping the R&D fraction up to the value fraction level
• The "value fraction" is a just and reasonable estimate of the proportion of the value of the relevant qualifying IP rights attributable to R&D carried out by the company itself or by unconnected parties on its behalf
• The election is made by notifying HMRC no later than the deadline for amending the company's tax return for the accounting period