My client company operates in a Objective One area. It is indirectly taking part in the Objective One Programme.
The company is carrying out Geo-environmental research and invoices a third party for the work that it carries out.
The third party (a large university) receives Objectiove One funding from the European Regional Development Fund.
The work my client carries out would appear to qualify for R&D tax credit, but does the fact that the fund indirectly come from European sources invilidate some or all (notifies state aid?) of the claim.
Any help would be appreciated.
(the background to the Objective One programme can be found atwww.wefo.wales.gov.uk)
Rob Vaughan
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Replies (3)
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Further query
Thank you for your responses.
This appears to help. However, there is a further complication. A Ltd (an SME)is the subcontractor to a University and on the face of it would be able to claim under the FA2002 rules. However, the work is actually carried out by C Ltd and D Ltd. Can these companies also claim under the FA2002 rules? Does the fact that A Limited subcontract the work to other third parties stop it claiming?
In summary, A Limited is an intermediary, so the work is not subcontracted directly from large company to the SME's actually performing the work.
I would be grateful for any further assistance.
Thank you.
Further comment
Harry
Thank you.
C Ltd and D Ltd are not qualifying bodies, individuals or partnerships.
Hence, to summarise, the position as I see it, is as follows:-
1. University does not get relief on expenditure subcontracted to A Ltd.
2. If A Limited had carried out the reseach work, it would have been able to claim enhanced relief. However, since it further subcontracted the work to C Ltd and D Ltd and these companies are not qualifying bodies, individuals or partnerships, the conditions of Sch 12 para 10 are not satisifed and enhanced relief cannot be claimed.
3. C Ltd and D Ltd (also clients)cannot claim because the conditions of Sch 12 para 8 are not met. i.e the R&D work contacted to them is not by a large company (having come through A Ltd).
4. The existence of A Ltd (set up at the insistence of the university concerned) therefore prevents any enhanced relief being claimed.
Do you agree with my summary?
What are you claiming?
There are two types of Enhanced R&D allowances: FA2000 and FA2002.
FA2000 is the generous one: 150% enhancement and 16% thereof as a repayment from Gordon.
FA2002 is less generous: Just 125% enhancement and no cash-back option.
Your client does not appear to qualify for FA2000 because they are carrying out work that has been contracted out to them by a third party.
The contract might still meet the criteria for FA2002 as this specifically includes work that is "contracted in".
The beauty of the FA2002 rules is that there is no prohibition on subsidied work - even notified state aids.