What does section 357PA of the Corporation Tax Act 2010 do?

Section 357PA determines how R&D expenditure credits are allocated for Northern Ireland companies. Where a company is entitled to an R&D expenditure credit for an accounting period in relation to a qualifying trade and is a Northern Ireland company, the credit forms part of the company's mainstream profits or mainstream losses rather than its Northern Ireland profits.

Are R&D expenditure credits taxed at the Northern Ireland corporation tax rate?

No. Under section 357PA, R&D expenditure credits are treated as part of a Northern Ireland company's mainstream profits. This means they are taxed at the standard UK corporation tax rate rather than any potentially lower Northern Ireland corporation tax rate, even where the company qualifies as a Northern Ireland company for the accounting period.

What conditions must be met for section 357PA to apply?

Two conditions must be satisfied. First, the company must be entitled to an R&D expenditure credit for an accounting period in relation to a qualifying trade. Second, the company must be a Northern Ireland company during that relevant accounting period. When both conditions are met, the R&D expenditure credit is allocated to mainstream profits or losses.

How does section 357PA affect the calculation of a Northern Ireland company's corporation tax liability?

Section 357PA allocates R&D expenditure credits to the mainstream profits stream. This increases mainstream profits, which are taxed at the standard UK rate, while Northern Ireland profits remain unchanged and may be taxed at the Northern Ireland rate if set. The allocation is critical when computing overall corporation tax where different rates apply to each stream.

Corporation Tax Act 2010 section 357PA

R&D expenditure credit

Section 357PA establishes how Research and Development (R&D) expenditure credits are treated for Northern Ireland companies under the Northern Ireland corporation tax regime.

This section applies where a company is entitled to an R&D expenditure credit for an accounting period in relation to a qualifying trade
The company must be a Northern Ireland company during the relevant accounting period
Where both conditions are met, the R&D expenditure credit forms part of the company's mainstream profits or mainstream losses of the trade
This ensures that R&D expenditure credits are allocated to the mainstream (non-Northern Ireland rate) portion of a company's trading results

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