SCHEDULES
C1SCHEDULE 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).
15Refunds of contributions to independent research and development etc
1
This paragraph applies where a company receives a payment refunding the whole or any part of—
a
any qualifying expenditure on sub-contracted research and development (see paragraph 5),
b
any qualifying expenditure on contributions to independent research and development (see paragraph 6), F1...
c
any expenditure which is qualifying sub-contracted R&D expenditure by virtue of paragraph 10, F2or
d
any expenditure which is qualifying additional SME expenditure,
in respect of which it obtains relief under this Schedule.
2
The appropriate amount shall be treated as income of the company chargeable to tax under Case I of Schedule D for the accounting period in which the payment is made.
3
Where, by virtue of paragraph 13(3) (profits of life assurance business chargeable to tax under Case VI of Schedule D), the relief obtained in respect of the contribution or expenditure concerned is a deduction in computing for tax purposes the profits of a part of the life assurance business of the company—
a
sub-paragraph (2) does not apply, and
b
the appropriate amount shall be treated as income referrable to that part which is chargeable to tax under Case VI of Schedule D for the accounting period in which the payment is made.
4
For this purpose “the appropriate amount” means 25% of the payment.
16Artificially inflated claims for deduction
1
To the extent that a transaction is attributable to arrangements entered into wholly or mainly for a disqualifying purpose, it shall be disregarded in determining for an accounting period the amount of any relief to which a company is entitled under this Schedule.
2
Arrangements are entered into wholly or mainly for a “disqualifying purpose” if their main object, or one of their main objects, is to enable a company to obtain relief under this Schedule to which it would not otherwise be entitled or of a greater amount than that to which it would otherwise be entitled.
3
In this paragraph “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.
Sch. 12 modified (with effect as specified in art. 2 of the commencing S.I. of the commencing S.I.) by Finance Act 2004 (c. 12), s. 53(2)(6); S.I. 2004/3268, art. 2