Amendments made: 23, page 246, line 41, at end insert—

‘If the amount remaining after step 1 is greater than the net value of the set-off amount (see subsection (2A)), that amount is to be reduced to the net value of the set-off amount.

For provision about the treatment of the amount deducted under this step from the amount remaining after step 1, see section 104NA.

Step 3’.

Amendment 24, page 247, line 1, leave out ‘step 1’ and insert ‘step 2’.

Amendment 25, page 247, line 6, leave out from ‘(b)’ to ‘is’ in line 7 and insert

‘the amount deducted under paragraph (a) from the amount remaining after step 2’.

Amendment 26, page 247, line 11, leave out ‘step 3’ and insert ‘step 4’.

Amendment 27, page 247, line 12, leave out ‘Step 3’ and insert ‘Step 4’.

Amendment 28, page 247, line 13, leave out ‘step 2’ and insert ‘step 3’.

Amendment 29, page 247, line 16, leave out ‘step 4’ and insert ‘step 5’.

Amendment 30, page 247, line 17, leave out ‘Step 4’ and insert ‘Step 5’.

Amendment 31, page 247, line 19, leave out ‘step 3’ and insert ‘step 4’.

Amendment 32, page 247, line 22, leave out ‘step 5’ and insert ‘step 6’.

Amendment 33, page 247, leave out lines 23 to 36.

Amendment 34, page 247, line 46, at end insert—

‘(2A) To determine the net value of the set-off amount for the purposes of step 2 in subsection (2), deduct from the set-off amount amount A and, in the case of a ring fence trade, amount B.

Amount A is the amount equal to the corporation tax that would be chargeable on the set-off amount if—

(a) it did not include any amount treated as an amount of R&D expenditure credit for the accounting period by virtue of step 3 in subsection (2), and

(b) it was an amount of profits (or in the case of a ring fence trade, ring fence profits) of the company for the accounting period and corporation tax on such profits was chargeable at the main rate.

Amount B is the amount equal to the supplementary charge that would be chargeable on the set-off amount if—

(a) it did not include any amount treated as an amount of R&D expenditure credit for the accounting period by virtue of step 3 in subsection (2), and

(b) it was an amount of adjusted ring fence profits for the accounting period.’.

Amendment 35, page 248, line 12, at end insert—

‘104NA Amounts deducted by way of tax adjustment

(1) This section applies if—

(a) a company is entitled to an R&D expenditure credit for an accounting period under this Chapter, and

(b) the amount of the set-off amount remaining after step 1 in section 104N(2) is greater than the net value of the set-off amount.

(2) An amount equal to the difference between—

(a) the amount remaining after step 1 in section 104N(2), and

(b) the net value of the set-off amount,

(“the step 2 amount”) is to be applied in discharging any liability of the company to pay corporation tax for any subsequent accounting period.

This is subject to subsection (3).

(3) If the company is a member of a group, it may surrender the whole or any part of the step 2 amount to any other member of the group (the “relevant group member”).

In such a case, section 104Q(3) applies to the amount surrendered as it applies to an amount of R&D expenditure credit surrendered under step 5 in section 104N(2).

(4) If any of the amount surrendered under subsection (3) is remaining after the operation of step 3 in section 104Q(3), it is to be treated for the purposes of this section as if it had not been surrendered to the relevant group member.

(5) Any amounts to be applied under subsection (2) or (3) in discharging any liability of a company to pay corporation tax for an accounting period are to be so applied before any amounts that may be so applied under step 1, 4 or 5 in section 104N(2).

(6) The surrender by a company of the whole or any part of the step 2 amount to another company under this section—

(a) is not to be taken into account in determining the profits or losses of either company for corporation tax purposes, and

(b) for corporation tax purposes is not to be regarded as the making of a distribution.

(7) Any reference in this section to the set-off amount, or the net value of the set-off amount, is to be read in accordance with section 104N.’.

Amendment 36, page 249, line 42, leave out ‘step 4’ and insert ‘step 5’.

Amendment 37, page 250, line 21, leave out ‘step 4’ and insert ‘step 5’.

Amendment 38, page 250, line 27, leave out from beginning to end of line 10 on page 251.—(Mr Gauke.)

Schedule 14, as amended, agreed to.