Corporation Tax Act 2009

Software or consumable items U.K.

1125 “Software or consumable items” U.K.

(1) For the purposes of this Part expenditure on software or consumable items means expenditure on—

(a) computer software, or

(b) consumable or transformable materials.

(2) For the purposes of subsection (1)(b) consumable or transformable materials include water, fuel and power.

Modifications etc. (not altering text)

C1 S. 1125 applied (with modifications) by 2010 c. 4, s. 357BLB(7)(c) (as inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(3))

1126 Software or consumable items: attributable expenditure U.K.

(1) This section applies for the purposes of this Part to identify when expenditure on software or consumable items is attributable to relevant research and development.

(2) Expenditure on software or consumable items is so attributable if the software or consumable items are employed directly in relevant research and development.

(3) Subsection (4) applies if software or consumable items are partly employed directly in relevant research and development.

(4) The appropriate proportion of the expenditure on the software or consumable items is treated as attributable to relevant research and development.

(5) Subsection (6) applies if software or consumable items are employed in the provision of services, such as secretarial or administrative services, in support of other activities.

(6) The software or consumable items are not, as a result of their employment in the provision of those services, to be treated as themselves directly employed in those activities.

[F1 (7) This section is subject to sections 1126A and 1126B.]

Textual Amendments

F1 S. 1126(7) inserted (with effect in accordance with s. 28(7) of the amending Act) by Finance Act 2015 (c. 11), s. 28(2)

Modifications etc. (not altering text)

C2 Ss. 1126-1126B applied (with modifications) by 2010 c. 4, s. 357BLB(7)(d) (as inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(3))

[F2 1126A Attributable expenditure: special rules U.K.

(1) Expenditure on consumable items is not to be treated as attributable to relevant research and development if—

(a) the relevant research and development relates to an item that is produced in the course of the research and development,

(b) the consumable items form part of the item produced,

(c) the item produced is transferred by a relevant person for consideration in money or money's worth, and

(d) the transfer is made in the ordinary course of the relevant person's business.

(2) Expenditure on consumable items is not to be treated as attributable to relevant research and development if—

(a) the relevant research and development relates to a process of producing an item,

(b) the consumable items form part of an item produced in the course of that research and development,

(c) the item produced is transferred by a relevant person for consideration in money or money's worth, and

(d) the transfer is made in the ordinary course of the relevant person's business.

(3) If—

(a) the item produced as described in subsection (1) or (2) may be divided, and

(b) only a proportion (“the appropriate proportion”) of that item is transferred by a relevant person as described in subsection (1)(c) and (d) or (2)(c) and (d),

the appropriate proportion of the expenditure on the consumable items is not to be treated as attributable to the relevant research and development.

(4) If—

(a) a number of items are produced in the course of the relevant research and development described in subsection (2), and

(b) only a proportion (“the appropriate proportion”) of those items is transferred by a relevant person as described in subsection (2)(c) and (d),

the appropriate proportion of the expenditure on the consumable items is not to be treated as attributable to the relevant research and development.

(5) A reference in this section to producing an item includes a reference to preparing an item for transfer.

(6) For the purposes of this section a consumable item forms part of an item produced if—

(a) it is incorporated into the item produced, or

(b) it is turned into, or it and other materials are turned into, the item produced or a part of the item produced.

(7) A reference in this section to the transfer of an item is a reference to—

(a) the transfer of ownership of an item to another person (whether by sale or otherwise), or

(b) the transfer of possession of an item to another person (whether by letting on hire or otherwise),

and a reference to the transfer of an item includes, where the item is incorporated into another item, the transfer of that other item.

(8) For the purposes of this section the provision of information obtained in testing an item is not to be regarded as consideration for the transfer of that item.

(9) For the purposes of this section a transfer of an item produced in the course of research and development is not to be regarded as a transfer in the ordinary course of business if the item being transferred is waste.

(10) In this section—

• “item” includes any substance;

• “relevant person”, in relation to relevant research and development, means—

  (a)

  the company that incurs the cost of the research and development, whether it is undertaken by itself or contracted out,

  (b)

  the company to which the research and development is contracted out, whether it is undertaken by itself or contracted out,

  (c)

  the person (other than a company) who contracts out the research and development to a company and incurs the cost of the research and development,

  (d)

  the person (other than a company) to whom the research and development is contracted out, or

  (e)

  a person who is connected to a company or person described in paragraph (a), (b), (c) or (d).

Textual Amendments

F2 Ss. 1126A, 1126B inserted (with effect in accordance with s. 28(7) of the amending Act) by Finance Act 2015 (c. 11), s. 28(3)

Modifications etc. (not altering text)

C2 Ss. 1126-1126B applied (with modifications) by 2010 c. 4, s. 357BLB(7)(d) (as inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(3))

1126B Attributable expenditure: further provision U.K.

(1) The Treasury may by regulations make provision for the purpose of identifying when expenditure on consumable items is attributable to relevant research and development, including provision modifying the effect of section 1126 or 1126A.

(2) Regulations under this section may include provision about—

(a) the circumstances in which expenditure on consumable items employed directly in relevant research and development is, or is not, to be treated as attributable to that relevant research and development;

(b) the circumstances in which consumable items are, or are not, to be treated as employed directly in relevant research and development.

(3) Regulations under this section may—

(a) make different provision for different purposes;

(b) make incidental, consequential, supplementary or transitional provision or savings.

(4) Regulations under this section may amend—

(a) section 1126;

(b) section 1126A;

(c) any other provision of this Act, if that is appropriate in consequence of provision made under paragraph (a) or (b).

(5) Regulations under this section may make provision that has effect in relation to expenditure incurred before the making of the regulations, provided that it does not increase any person's liability to tax.]

Textual Amendments

F2 Ss. 1126A, 1126B inserted (with effect in accordance with s. 28(7) of the amending Act) by Finance Act 2015 (c. 11), s. 28(3)

Modifications etc. (not altering text)

C2 Ss. 1126-1126B applied (with modifications) by 2010 c. 4, s. 357BLB(7)(d) (as inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(3))