Interpretation of subcontracted out R&D expenditure

Please could someone clarify a question on subcontracted R&D expenditure. This area is covered in the HMRC manual here http://www.hmrc.gov.uk/manuals/cirdmanual/CIRD84250.htm

If a company carrying out R&D has a sole trader make up mock-ups or models, would you treat this as subcontracted R&D or the external supply of materials and services? Would the answer be different if the sole trader modified the models slightly from the orginal plans, using their expertise to improve the practical outcome from the design?

The particular question relates to an SME claim and whether or not this expense should be subject to the 65% restriction.

We would have thought this wasn't subcontracted R&D but a contract to provide services. However experts in R&D claims have questioned this interpretation.

We'd be interested to hear other opinions on how this should be treated.

Thanks.

 

Comments
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In my experience...

George Attazder |
George Attazder's picture

Sub-Contracted

merlyn |

Eh?

George Attazder |
George Attazder's picture

Here

merlyn |

Thank you

George Attazder |
George Attazder's picture

No Problem

merlyn |

Merlyn, please clarify

BKD |
BKD's picture

HMRC Rules

merlyn |

Authority

BKD |
BKD's picture

Letter

merlyn |

Tell HMRC to read the legislation and their manuals.

afairpo |
afairpo's picture

Lesson learned....never trust the HMRC

merlyn |

Going back to the original point

George Attazder |
George Attazder's picture

Supply of transformable items

merlyn |

What I find odd ...

BKD |
BKD's picture

me too

merlyn |

So ...

BKD |
BKD's picture

yes

merlyn |

Spoke to the inspector

merlyn |

Thanks for a lot of replies!

newmoon |

Phew, nice to see that the R&D guys haven't lost their marbles!

afairpo |
afairpo's picture

Anne, please come back!

George Attazder |
George Attazder's picture

Ack, yes

afairpo |
afairpo's picture