Corporation Tax Act 2009 section 104K

Qualifying expenditure on contracted out R&D

Section 104K defines what counts as qualifying expenditure on contracted out research and development for large companies.

• Payments for contracted out R&D qualify when made to qualifying bodies, individuals, or partnerships composed entirely of individuals who carry out the R&D themselves.
• The contracted out R&D must relate to relevant research and development undertaken on behalf of the company claiming the expenditure.
• Where the R&D has been sub-contracted down to the company (i.e. the company itself received the contract from someone else), the original contracting party must be either a large company or a person not carrying on a chargeable trade.
• A chargeable trade is defined as a trade, profession, or vocation carried on in the UK that is subject to either income tax or corporation tax.