A company's “qualifying expenditure on contracted out research and development” means expenditure in relation to which each of conditions A to D is met.

Condition A is that the expenditure is incurred in making the qualifying element of a sub-contractor payment (see sections 1134 to 1136) to a sub-contractor.

Condition B is that the expenditure is attributable to qualifying R&D activity (see section 1086) undertaken by the sub-contractor itself.

Condition C is that the R&D activity to which the expenditure is attributable is relevant research and development in relation to the company.

Condition D is that the expenditure is not subsidised (see section 1138).

See sections 1124, 1126 and 1132 for provision about when particular kinds of expenditure are attributable to relevant research and development.