Corporation Tax Act 2009 section 1042F

Qualifying expenditure: activity as contractor for irrelievable client

Section 1042F sets out when a company's expenditure on research and development qualifies for the R&D expenditure credit where the company is acting as a subcontractor for a client that cannot itself claim R&D relief.

• The subcontractor company can claim qualifying expenditure where the R&D has been contracted out to it by an "irrelievable client" — either an ineligible company or a person not acting within the charge to tax
• An ineligible company includes certain entities such as charities or higher education institutions that cannot claim R&D relief in their own right
• A person not acting in the course of a trade, profession or vocation within the charge to tax — for example, an overseas entity with no UK tax presence — also counts as an irrelievable client
• The expenditure must be of a type that would have qualified as in-house R&D expenditure (under section 1042D) or as payments for contracted-out R&D (under section 1042E) if the work had not been contracted out to the company