Tax credits - outsourced R&D and qualifying expenses

Article by Shiv Mahalingham, Ernst & Young Energy Tax Group. This article appeared in the November 2004 issue of Tax Adviser. The guidelines issued by the Department of Trade & Industry on 5 March 2004 have introduced some much needed clarity to the definition of research and development for the purposes of the corporation tax credits available in the UK; the guidelines were discussed by David Bertram in Tax Adviser, August 2004.

However, for many companies the definition itself is only the start of what can be an extremely long and complicatied process and this follow-up article will demonstrate thtat there is potentially much more to do once a company is satisfied that its operations would actually qualify as R&D. References in this article will be made to the following legislation:

• Finance Act 2000, Sch 20 tax credits - small/medium-sized companies; and
  
• Finance Act 2002 Sch 12 tax credits - large companies.
  

Technical Department
020 7235 9381

November 2004 by Shiv Mahalingham