Corporation Tax Act 2009 section 1133

Contracted out research and development

Section 1133 defines what it means to contract out research and development, what a contractor payment is, and how the qualifying element of such a payment is determined.

• R&D is "contracted out" when a company enters into a contract expecting that R&D will be carried out to fulfil the contract obligations, whether by the other contracting party or by a sub-contractor
• The R&D is contracted out "to" whichever party undertakes the contractual obligations involving R&D, including any sub-contractor in the chain, no matter how many levels removed
• A "contractor payment" is a payment made for contracted out R&D to the person to whom it was contracted out, with apportionment on a just and reasonable basis where a payment only partly relates to the contracted out R&D
• The "qualifying element" of a contractor payment — the portion eligible for additional R&D tax relief — is determined by sections 1134 to 1136