Corporation Tax Act 2010 section 357CHA

Shortfall in qualifying expenditure

Section 357CHA sets out how to determine whether a television production company or video games development company has a shortfall in qualifying expenditure for a relevant accounting period, and how to calculate the amount to be added to actual expenditure when a shortfall exists.

• A shortfall arises when the actual qualifying expenditure of the separate trade in an accounting period falls below 75% of the average qualifying expenditure calculated over a prior reference period of up to four years.
• Where a shortfall exists, the amount added to the actual qualifying expenditure (for the purposes of section 357CG(5A)) equals the difference between 75% of the average qualifying expenditure and the actual qualifying expenditure, as adjusted.
• The average qualifying expenditure is calculated using the formula (E / N) × 365, where E is the total qualifying expenditure over the reference period and N is the number of days in that period, with a proportionate reduction if the relevant accounting period is shorter than 12 months.
• Unused portions of additional amounts — where actual expenditure exceeds the average or where a shortfall would only arise but for a prior adjustment — can be carried forward and added to the actual qualifying expenditure of the next accounting period.