Corporation Tax Act 2009 section 1078

Qualifying expenditure on contracted out R&D

Section 1078 defines what counts as "qualifying expenditure on contracted out research and development" for the purposes of the R&D tax relief scheme for large companies.

• This section sets out the conditions that must be met for expenditure on R&D work contracted out to another party to qualify under the large company R&D scheme.
• The expenditure must relate to R&D activities that the company has paid someone else to carry out on its behalf, rather than conducting the work in-house.
• There is no need for the section to include a separate rule excluding capital expenditure, because the general rule in section 53 of the Act (in Part 3, dealing with trading income) already prevents a deduction for expenditure of a capital nature.
• The definition works alongside the other qualifying expenditure rules in the R&D scheme to determine the total amount on which relief can be claimed.