Leyton Ireland - R&D Tax Credit - Finance Act 2008

R&D Tax Credit - Finance Act 2008 – Subcontracting

12/05/2008

R&D Tax Credit - Finance Act 2008 – Subcontracting

Expenditure on subcontracting R&D to third parties allowable (within certain limits). Base year to remain 2003 up to 1 January 2014.

In addition to the existing provisions in relation to subcontracting R&D to universities, for accounting periods ending on or after 1 January 2007, companies may include expenditure incurred on R&D activities which are sub-contracted to unconnected third parties. This expenditure may be included to the extent that it does not exceed 10% of the qualifying R&D expenditure incurred by the company on in house R&D activities in any one year.

In addition to the 10% restriction, such expenditure may only be claimed to the extent that the third party does not claim a R&D tax credit for the same R&D expenditure.

Finance Act 2008 amended the definition of the “threshold amount” so that 2003 will continue to be the base year for expenditure incurred by a company in carrying on R&D activities up to the end of 2013. This means for periods commencing on or after 1 January 2004 and ending before 1 January 2014, the base amount is the R&D expenditure incurred in a corresponding period ending in 2003. Thereafter a 10 year rolling base year has been introduced.

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