Corporation Tax Act 2010 section 357GCZC

R&D undertaken or contracted out by another party to CSA

Section 357GCZC explains how research and development carried out or subcontracted by another party to a cost-sharing arrangement is treated for the purposes of calculating the R&D fraction under the Patent Box rules.

• Where another party to a cost-sharing arrangement directly undertakes R&D to create or develop an invention, the company is treated as having subcontracted that R&D to that party.
• Where another party ("P") subcontracts R&D to a third person ("A"), and the company makes a payment for that work, the company is treated as having directly subcontracted the R&D to P.
• Any payment the company makes under the arrangement for such subcontracted R&D — whether paid to P or to A — is treated as a payment made to P for the work the company is deemed to have contracted out.
• These deemed subcontracting rules feed into the qualifying expenditure calculations under sections 357BLC and 357BLD, which determine the R&D fraction used in computing relevant IP profits.