Chapter 1Introduction
Introductory
1039Overview of Part
(1)This Part provides for corporation tax relief for expenditure on research and development.
(2)Relief under this Part is in addition to any deduction given under section 87 for the expenditure.
(3)Relief under Chapters 2 to 4 is available to a company which is a small or medium-sized enterprise, in particular—
(a)Chapter 2 provides for relief where the cost of in-house direct research and development or contracted out research and development is incurred by the company,
(b)Chapter 3 provides for relief where research and development is contracted out to the company, and
(c)Chapter 4 provides for relief for research and development expenditure which is subsidised or in respect of which the company is prevented from obtaining relief under Chapter 2 by the cap on aid imposed by section 1113.
(4)Relief under Chapter 5 is available to large companies (and insurance companies treated as large companies).
(5)Chapter 6 contains further provision in relation to relief under Chapters 2 to 5, in particular—
(a)section 1081 provides for certain insurance companies to be treated as large companies,
(b)section 1082 contains provision about expenditure of group companies,
(c)section 1083 contains provision in relation to refunds of certain expenditure on which relief has been obtained (treating part of those refunds as income chargeable to tax), and
(d)section 1084 contains an anti-avoidance provision dealing with artificially inflated claims for relief or R&D tax credits (as to which, see subsection (7) below).
(6)Relief under Chapter 7 is available to companies (whether they are small or medium-sized enterprises or large companies) where expenditure is incurred on vaccine or medicine research.
(7)Chapters 2 and 7 also provide for the payment of tax credits (“R&D tax credits”) where a company which is a small or medium-sized enterprise—
(a)obtains relief under Chapter 2 or 7, and
(b)makes, or is treated as making, a trading loss.
(8)Chapter 8 contains provision limiting the amount of relief available under Chapter 2 or 7 in relation to expenditure on a particular research and development project.
(9)Chapter 9 contains supplementary provision, including definitions.
(10)For information about the procedure for making claims under this Part see Schedule 18 to FA 1998, in particular Part 9A of that Schedule (claims for R&D tax reliefs).
1040Relief may be available under more than one Chapter of Part
Expenditure may be eligible for relief under more than one Chapter of this Part.
Interpretation
1041“Research and development”
In this Part “research and development” has the meaning given by section 837A of ICTA.
1042“Relevant research and development”
(1)In this Part “relevant research and development”, in relation to a company, means research and development—
(a)related to a trade carried on by the company, or
(b)from which it is intended that a trade to be carried on by the company will be derived.
(2)Research and development related to a trade carried on by a company includes—
(a)research and development which may lead to or facilitate an extension of the trade, and
(b)research and development of a medical nature which has a special relation to the welfare of workers employed in the trade.
(3)But any reference to “relevant research and development” which applies for the purposes of Chapter 7 (relief for SMEs and large companies: vaccine research etc) is to be read as if subsection (2)(b) were omitted.