Corporation Tax Act 2009 section 1053A

Qualifying expenditure: activity as contractor for irrelievable client

Section 1053A allows a company acting as a subcontractor to claim R&D relief on expenditure where the client who contracted out the research cannot claim R&D relief themselves.

• Expenditure qualifies under Chapter 2 if three conditions (A, B and C) are all met.
• The expenditure must relate to research and development that has been contracted out to the company by another person (Condition A).
• Every person who contracted out the R&D must either be an ineligible company or not acting in the course of a UK-taxable trade, profession or vocation when contracting out the work (Condition B).
• The expenditure must be of a type that would have qualified as in-house or contracted-out R&D expenditure under sections 1052 or 1053, were it not for the fact that the work was contracted out to the company (Condition C).