Corporation Tax Act 2009 sections 119-121

Staffing costs

Sections 119 to 121 set out transitional modifications to the rules on staffing costs for R&D tax relief, reflecting how the definition of qualifying staffing expenditure and the method of attributing costs to R&D activity changed over time.

• For expenditure incurred before 1 April 2004 (in accounting periods ending on or after 6 April 2003), staffing costs are limited to earnings paid to directors or employees that constitute employment income, rather than the broader modern definition.
• For expenditure incurred before 1 August 2008, the provisions covering reimbursed expenses and payments to intermediaries (subsections (5) and (6) of section 1123) do not apply.
• For expenditure incurred before 27 September 2003 (for SME and large company schemes) or before 9 April 2003 (for vaccine research and other specific R&D schemes), a simplified threshold method is used to attribute staffing costs to R&D activity.
• Under this simplified method, if a director or employee spends less than 20% of their working time on R&D none of their staffing costs qualify; if they spend more than 80% all of their staffing costs qualify; and between those thresholds an appropriate proportion qualifies.