SCHEDULES
SCHEDULE 12Tax relief for expenditure on research and development
Part 5Supplementary provisions
14Research and development expenditure of group companies
1
Sub-paragraph (2) applies where—
a
a company (“A”) incurs expenditure on making a payment to another company (“B”) in respect of activities contracted out by A to B,
b
the expenditure incurred on the payment is research and development expenditure of A, and
c
A and B are members of the same group at the time the payment is made.
2
For the purposes of this Schedule —
a
any of the activities contracted out by A to B and directly undertaken by B shall be treated (to the extent that it would not otherwise be the case) as research and development directly undertaken by B, and
b
where B makes a payment to a third party (“C”) in respect of any of those activities that are contracted out by B to C and directly undertaken by C, those activities shall be treated (to the extent that it would not otherwise be the case) as research and development contracted out by B to C.
3
For the purposes of this paragraph A and B are members of the same group if they are members of the same group of companies for the purposes of Chapter 4 of Part 10 of the Taxes Act 1988 (group relief).