Taxes Consolidation Act 1997 section 769O

Transitional measures

Section 769O sets out transitional arrangements for calculating qualifying profits under the knowledge development box where qualifying assets were developed or acquired before 1 January 2016.

• Acquisition costs and group outsourcing costs incurred before 1 January 2016 must always be included in the modified nexus formula, regardless of when they were incurred.
• For accounting periods from 1 January 2016 to 31 December 2019, qualifying expenditure is calculated on a rolling 48-month basis, with pre-2016 amounts apportioned as a portion of total qualifying expenditure on qualifying assets.
• From 1 January 2020, qualifying expenditure incurred before 1 January 2016 can no longer be included in the formula, though pre-2016 acquisition costs and group outsourcing costs remain.
• Where a company has documentation meeting the standard required by section 769L, it may use actual expenditure figures instead of relying on the transitional arrangements.