Commentary on Sections Overview Overview Section 1101: Qualifying expenditure on in-house direct R&D
2857.This section defines “qualifying expenditure on in-house direct research and development”. It is based on paragraph 3 of Schedule 13 to FA 2002.
2858.“In-house direct research and development” is the term this Act uses to describe research and development that is undertaken directly by the company.
2859.Subsections (2) and (3) rewrite sub-paragraphs (2) and (3) of paragraph 3 of Schedule 13 to FA 2002 which refer to the expenditure being on qualifying R&D activity. This section refers to the expenditure being attributable to qualifying R&D activity in order to align the language with that in Chapters 2 to 5 of this Part.
2860.Paragraph 3(3) of Schedule 20 to FA 2000 and paragraphs 4(4) and 9(3) of Schedule 12 to FA 2002 all require that the qualifying expenditure is attributable to relevant research and development. The provisions that define particular classes of expenditure have rules for determining if the expenditure is attributable to relevant research and development.
2861.Paragraph 3(3) of Schedule 13 to FA 2002 requires that the “qualifying R&D activity on which the expenditure is incurred is relevant research and development in relation to the company”. This test is the same as requiring the expenditure to be attributable to relevant research and development and the section adopts the language of the earlier Chapters.
2862.The section does not reproduce the condition in paragraph 3(4) of Schedule 13 to FA 2002 that the expenditure is not of a capital nature. This is not necessary as section 53 in Part 3 (trading income) already prohibits a deduction for capital expenditure.