Part 6

Research and development allowances
Chapter 1

Introduction

Research and development allowances
437
1
Allowances are available under this Part if a person incurs qualifying expenditure on research and development.
2
In this Part “research and development”—
a
means activities that fall to be treated as research and development in accordance with generally accepted accounting practice, and
b
includes oil and gas exploration and appraisal.
3
But—
a
activities that, as a result of regulations made under section 1006 of ITA 2007, are “
research and development
” for the purposes of that section are also “
research and development
” for the purposes of this Part, and
b
activities that, as a result of any such regulations, are not “
research and development
” for the purposes of that section are also not “
research and development
” for the purposes of this Part.

Expenditure on research and development
438
1
Expenditure on research and development includes all expenditure incurred for—
a
carrying out research and development, or
b
providing facilities for carrying out research and development.
2
But it does not include expenditure incurred in the acquisition of—
a
rights in research and development, or
b
rights arising out of research and development.
3
Nor does it include expenditure on the provision of a dwelling.
4
But if—
a
part of a building consists of a dwelling and the rest of the building is used for research and development, and
b
no more than 25% of the capital expenditure referable to the construction or acquisition of the whole building is referable to the construction or acquisition of the dwelling,
the whole of the building is to be treated as used for research and development.
5
For the purposes of subsection (4)(b), the expenditure referable to the construction or acquisition of the building is to be apportioned in a just and reasonable manner.
6
Any additional VAT liability or rebate (as to which see Chapter 4) is to be disregarded in applying subsection (4)(b).
S. 45H(2) modified (with effect in accordance with s. 167 of the amending Act) by Finance Act 2003 (c. 14) , Sch. 30 para. 7
S. 437(2)(3) substituted for s. 437(2) (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 407 (with Sch. 2)