CIRD131000 - R&D Tax Reliefs: reformed reliefs: categories of qualifying expenditure: overview

See also CIRD112300 and CIRD122200 for an overview of expenditure conditions that must be met for new RDEC and ERIS respectively.

The qualifying expenditure rules and categories are aligned between new RDEC and ERIS (but note that special rules apply to companies registered in Northern Ireland – see CIRD125000). However, some legislative references are different.

The category of contributions to independent research is abolished.

All qualifying expenditure is either on in-house R&D of the company, or on contracted out R&D of the company, or on activity of the company as contractor to an irrelievable client (including situations where the company and the client are members of the same group and have made a joint election under CTA09/S1142(5) - see CIRD164000).

Guidance on the meaning of “contracted out” is given at CIRD160000 and following. For the meaning of “relevant R&D”, see CIRD81400. Guidance on exempt foreign permanent establishments is available at CIRD190000.

In-house R&D (CTA09/S1042D & S1052)

This must be:

• Attributable to relevant R&D undertaken by the company itself (Condition A)
• Incurred on one of the qualifying cost categories (see table below) (Condition B)
• On R&D that is not contracted out to the company (Condition C)
• Not attributable to expenditure of an exempt foreign permanent establishment (Condition D)

Contracted out R&D (CTA09/S1042E & S1053)

This must be:

• Attributable to relevant R&D contracted out by the company (Condition A)
• Not attributable to R&D contracted out to the company (Condition B)
• Incurred in making the qualifying element of a subcontractor payment within CTA09/S1133 to S1136 (see CIRD138000) (Condition C)
• Not attributable to expenditure of an exempt foreign permanent establishment (Condition D)

Activity as contractor for irrelievable client (CTA09/S1042F & S1053A)

This must satisfy the following conditions:

• It is attributable to relevant R&D contracted out to the company (Condition A)
• Each person by whom the R&D is contracted out to the company is either:
  (Condition B)
  • an ineligible company (see CIRD163000) or
    
  • contracting out the R&D otherwise than in the course of a trade, profession, or vocation within the charge to tax
• It would otherwise be qualifying Chapter 1A or Chapter 2 expenditure in virtue of CTA09/S1052-3 or CTA09/S1042D-E, but for the fact that it is contracted out to the company (Condition C)

Table of legislative references (all relate to CTA09 unless otherwise specified)

Description	New RDEC (Chapter 1A qualifying expenditure)	ERIS (Chapter 2 qualifying expenditure)	Additional guidance
In-house R&D	1042D	1052	See above, also CIRD160000 and following
Contracted out R&D	1042E	1053
Activity as contactor for irrelievable client	1042F	1053A
Staffing costs	1123 to 1124		CIRD133000
Software, data licenses, cloud computing services or consumable items	1125 to 1126B		CIRD134000 (software) CIRD135000(data and cloud) CIRD136000(consumables)
Externally provided workers	1127 to 1132A		CIRD137000
Contractor payments	1133 to 1136		CIRD138000 CIRD160000 and following
Relevant payments to the subjects of a clinical trial	1140		CIRD139000