2(1)In paragraph 1 (entitlement to R&D tax relief)—
(a)in sub-paragraph (1)(b) (requirement that qualifying R&D expenditure is not less than £25,000), for “the company’s qualifying R&D expenditure (see paragraph 3)” substitute “the aggregate of its qualifying R&D expenditure (see paragraph 3) and its qualifying sub-contracted R&D expenditure (within the meaning of paragraph 8 of Schedule 12 to the Finance Act 2002)”;
(b)after sub-paragraph (3) insert—
“(3A)For the purposes of sub-paragraph (1)(b) a company’s qualifying sub-contracted R&D expenditure (within the meaning of paragraph 8 of Schedule 12 to the Finance Act 2002) is deductible in an accounting period if it is allowable as a deduction in computing for tax purposes the profits for that period of a trade carried on by the company.”.
(2)This paragraph does not apply in relation to a company’s qualifying sub-contracted R&D expenditure (within the meaning of paragraph 8 of Schedule 12 to this Act) incurred before 1st April 2002.
For this purpose no account shall be taken of section 401 of the Taxes Act 1988 (pre-trading expenditure treated as incurred when trading begins).