Section 1134 Qualifying element of contractor payment: connected personsF16

United Kingdom

(1)

This section applies if—

F1(a)

a company (“A”) makes a contractor payment to another person (“B”),

(b)

A and B are connected, and

(c)

in accordance with generally accepted accounting practice, the whole of the F2... payment and all of F3B’s relevant expenditure have been brought into account in determining B’s profit or loss for a relevant period.

(2)

The qualifying element of the F4... payment is—

(a)

the entire payment, or

(b)

if less, an amount equal to F5B’s relevant expenditure.

(3)

“Relevant expenditure” of F6B means expenditure that—

(a)

is incurred by F7B in carrying on, on behalf of the company, the activities to which the F8... payment relates,

(b)

is not of a capital nature,

(c)

is incurred on staffing costs, software F9, data licences, cloud computing services or consumable items or relevant payments to the subjects of a clinical trial or is qualifying expenditure on externally provided workers, and

F10(e)

is incurred in respect of—

(i)

research and development that is undertaken in the United Kingdom, or

(ii)

research and development that is undertaken outside the United Kingdom and to which section 1138A applies.

(4)

“Relevant period” means a period—

(a)

for which accounts are drawn up for F11B, and

(b)

that ends not more than 12 months after the end of F12A’s period of account in which the F13contractor payment is, in accordance with generally accepted accounting practice, brought into account in determining A’s profit or loss.

F14(5)

In section 1123 (staffing costs) and sections 1127 to 1131 (qualifying expenditure on externally provided workers) as they apply for the purposes of subsection (3)(c), references to a company are to be read as references to B.

(6)

Any apportionment of expenditure of F15A or B necessary for the purposes of this section is to be made on a just and reasonable basis.

Annotations

Textual amendments

F1: S. 1134(1)(a)(b) substituted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(8)(b), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2
F2: Word in s. 1134(1)(c) omitted (with effect in relation to accounting periods beginning on or after 1.4.2024) by virtue of Finance Act 2024 (c. 3), Sch. 1 paras. 9(8)(c)(i), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2
F3: Word in s. 1134(1)(c) substituted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(8)(c)(ii), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2
F4: Word in s. 1134(2) omitted (with effect in relation to accounting periods beginning on or after 1.4.2024) by virtue of Finance Act 2024 (c. 3), Sch. 1 paras. 9(8)(d)(i), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2
F5: Word in s. 1134(2)(b) substituted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(8)(d)(ii), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2
F6: Word in s. 1134(3) substituted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(8)(e)(i), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2
F7: Word in s. 1134(3)(a) substituted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(8)(e)(ii), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2
F8: Word in s. 1134(3)(a) omitted (with effect in relation to accounting periods beginning on or after 1.4.2024) by virtue of Finance Act 2024 (c. 3), Sch. 1 paras. 9(8)(e)(iii), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2
F9: Words in s. 1134(3)(c) inserted (with effect in relation to accounting periods beginning on or after 1.4.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 1 paras. 6(b), 20
F10: S. 1134(3)(e) substituted for s.1134(3)(d) (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(8)(e)(iv), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2
F11: Word in s. 1134(4)(a) substituted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(8)(f)(i), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2
F12: Word in s. 1134(4)(b) substituted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(8)(f)(ii), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2
F13: Word in s. 1134(4)(b) substituted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(8)(f)(iii), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2
F14: S. 1134(5) substituted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(8)(g), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2
F15: Words in s. 1134(6) substituted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(8)(h), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2
F16: Word in s. 1134 heading substituted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(8)(a), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2

Notes on Part 13

Textual amendments

F1: Words in Pt. 13 heading omitted (with effect in relation to accounting periods beginning on or after 1.4.2024) by virtue of Finance Act 2024 (c. 3), Sch. 1 paras. 3, 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2

Notes on Contracting out

Textual amendments

F1: S. 1133 and cross-heading substituted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(7), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2