Corporation Tax Act 2009 section 1132A

Qualifying earnings

Section 1132A defines what counts as "qualifying earnings" for an externally provided worker when calculating R&D tax relief.

• An externally provided worker's earnings are "qualifying earnings" if the staff controller or the company claiming R&D relief is required to operate PAYE and account for Class 1 national insurance contributions on any part of those earnings.
• If the PAYE and NIC condition is not met, earnings can still qualify to the extent they relate to relevant R&D carried out outside the United Kingdom, where the overseas R&D rules in section 1138A apply.
• The overseas route is only available as a fallback — it applies only where the PAYE/NIC test does not already apply to the worker's earnings.
• "The worker's earnings" means the earnings under the contract through which the worker is provided, as described in section 1128(7).