Corporation Tax Act 2009 section 1142

Ineligible companies

Section 1142 defines which types of company are treated as "ineligible companies" for the purposes of the R&D tax relief rules, and provides a mechanism for two group companies to elect that one is treated as ineligible when it contracts out R&D to the other.

• Charities, higher education institutions, scientific research associations, health service bodies, and any other bodies prescribed by Treasury order are all classified as ineligible companies for R&D relief purposes.
• Higher education institutions include those within the higher education sector in England, Wales, Scotland, and Northern Ireland as defined by the relevant education legislation for each jurisdiction.
• A Treasury order prescribing additional ineligible bodies can apply retrospectively to accounting periods that began, or expenditure that was incurred, before the order was made.
• Two companies in the same group can jointly elect that, where one contracts out R&D to the other, the contracting-out company is treated as ineligible — and activity carried out by one company under a contract with the other is treated as if done by the other company where this causes the activity to qualify as R&D.