Corporation Tax Act 2009

1078 Qualifying expenditure on contracted out R&D

(1) A company’s “qualifying expenditure on contracted out research and development” means expenditure incurred by it in relation to which each of conditions A to D is met.

(2) Condition A is that the expenditure is incurred in making payments to—

(a) a qualifying body,

(b) an individual, or

(c) a firm, each member of which is an individual,

in respect of research and development contracted out by the company to the body, individual or firm concerned (“the contracted out R&D”).

(3) Condition B is that the body, individual or firm concerned undertakes the contracted out R&D itself.

(4) Condition C is that the expenditure is attributable to relevant research and development in relation to the company.

(5) Condition D is that, if the contracted out R&D is itself contracted out to the company, it is contracted out by—

(a) a large company, or

(b) any person otherwise than in the course of carrying on a chargeable trade.

(6) A “chargeable trade” is—

(a) a trade, profession or vocation carried on wholly or partly in the United Kingdom, the profits of which are chargeable to income tax under Chapter 2 of Part 2 of ITTOIA 2005, or

(b) a trade carried on wholly or partly in the United Kingdom, the profits of which are chargeable to corporation tax under Chapter 2 of Part 3 of this Act.

(7) See sections 1124, 1126 and 1132 for provision about when particular kinds of expenditure are attributable to relevant research and development.