Finance Act 2002

Qualifying expenditure on direct research and development

3 (1) Qualifying expenditure of a company on direct research and development is expenditure incurred by the company that satisfies the following conditions.

(2) The first condition is that the expenditure is on qualifying R&D activity (see paragraph 4) directly undertaken by the company.

(3) The second condition is that the qualifying R&D activity on which the expenditure is incurred is relevant research and development in relation to the company.

(4) The third condition is that the expenditure is not of a capital nature.

(5) The fourth condition is that the expenditure is incurred—

(a) on staffing costs, or

(b) on consumable stores.

(6) The fifth condition is that the expenditure is not incurred by the company in carrying on activities the carrying on of which is contracted out to the company by any person.

(7) The sixth condition is that the expenditure is not subsidised.