Corporation Tax Act 2009 section 1067

Expenditure on sub-contracted R&D not undertaken in-house

Section 1067 identifies what expenditure qualifies for R&D relief when a company outsources its research and development work to another person rather than carrying it out itself.

• When a company commissions another person to carry out R&D on its behalf, the payments made for that sub-contracted work can qualify for R&D relief
• The qualifying expenditure is the amount the company spends on the sub-contracted R&D activities
• Capital expenditure is automatically excluded from qualifying, because the general trading income rules already prohibit deductions for capital items
• This provision applies specifically to R&D that is not performed in-house by the company itself