Corporation Tax Act 2009 section 1058D

Exceptions to tax credit cap

Section 1058D sets out the conditions under which a company can be exempted from the cap on R&D tax credits that would otherwise apply under Section 1058.

• A company must meet two conditions (A and B) to qualify for an exception to the R&D tax credit cap.
• Condition A requires the company to be actively involved in creating or managing intellectual property, with that work carried out mainly by its own employees.
• Condition B requires that expenditure on externally provided workers or subcontracted R&D from connected parties does not exceed 15% of the company's total qualifying R&D expenditure for the period.
• The Treasury has the power to amend the 15% threshold by regulations.