CIRD163000 - R&D Tax Reliefs: reformed reliefs: contracted out R&D: ineligible companies

CTA09/S1142

Ineligible companies cannot claim R&D tax relief.

Any of the following is an ineligible company:

• a charity
• an institution of higher education such as a university
• a scientific research organisation
• a health service body

The Treasury may make an order prescribing a body as an ineligible company (CTA09/S1142(1)(e)).

Group election

Two group companies can make a joint election under CTA09/S1142(5). The effect of this election is that:

·       In respect of any R&D contracted out by one to the other, the one contracting R&D out is to be treated as an ineligible company

·       Where relief would not otherwise be available for activity undertaken by the contractor, because it is not R&D in that company's hands, but it is R&D for the customer, the activity is treated as if it were R&D for the contractor

Further guidance on the group election is available at CIRD164000.

Transitional provisions

The provisions at FA24/Para 18(4) & (5) deem a company to be ineligible in certain circumstances – see CIRD165000.