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Section 1138A Externally provided workers and contractors: R&D undertaken abroadC1F1

United Kingdom

(1)

This section applies to research and development undertaken outside the United Kingdom if—

(a)

the research and development is undertaken in the circumstances described in subsection (2), or

(F2b)

F3for the purposes of relief under Chapter 2 the research and development is undertaken, or contracted out, by a company whose registered office is in Northern Ireland.

(2)

The circumstances are that there are conditions necessary for the purposes of the research and development—

(a)

that are not present in the United Kingdom,

(b)

that are present in the location in which the research and development is undertaken, and

(c)

that it would be wholly unreasonable for the company to replicate in the United Kingdom.

(3)

In subsection (2) “conditions”—

(a)

includes—

(i)

geographical, environmental or social conditions;

(ii)

legal or regulatory requirements as a result of which the research and development may not be undertaken in the United Kingdom, but

(b)

does not include conditions so far as relating to—

(i)

the cost of the research and development;

(ii)

the availability of workers to carry out the research and development.

(4)

The Treasury may by regulations make provision specifying things that are not conditions for the purposes of subsection (2).

(F45)

Subsection (1)(b) does not apply in relation to a company in respect of an accounting period if the company—

(a)

has not, at any time during the accounting period, carried on a trade involving—

(i)

trade in goods, or

(ii)

the generation, transmission, distribution, supply, wholesale trade or cross-border exchange of electricity, and

(b)

has notified an officer of Revenue and Customs in writing that it wishes to rely on the exception in section 1112J(4) (restriction of Chapter 2 relief for Northern Ireland companies).

Annotations

Textual amendments

F1

Ss. 1138A, 1138B inserted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 9(12), 16 (with Sch. 1 para. 18); S.I. 2024/286, reg. 2

F2

S. 1138A(1)(b) substituted (with effect in accordance with s. 29(9) of the amending Act) by Finance Act 2025 (c. 8), s. 29(4)(a)(9)

F3

Words in s. 1138A(1)(b) inserted (with effect in accordance with s. 34(2) of the amending Act) by Finance Act 2026 (c. 11), s. 34(1)(2)

F4

S. 1138A(5) inserted (with effect in accordance with s. 29(9) of the amending Act) by Finance Act 2025 (c. 8), s. 29(4)(b)(9)

Modifications

C1

S. 1138A applied (1.4.2024) by The Research and Development (Chapter 2 Relief) Regulations 2024 (S.I. 2024/348), regs. 1(1), 3 (with 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