Corporation Tax Act 2009 section 104W

R&D expenditure of group companies

Section 104W deals with how research and development activities are treated for tax purposes when one group company pays another group company to carry out R&D on its behalf.

• When Company A pays a fellow group member (Company B) to perform activities that Company A would otherwise treat as its own R&D, those activities are treated as R&D carried out by Company B
• The R&D is attributed to the company actually performing the work (Company B), not the company funding it (Company A)
• If Company B subcontracts any of that work to a third party (Company C), the subcontracted activities are treated as R&D contracted out by Company B to Company C
• Both companies must be members of the same group for this treatment to apply