Timing of payment

Claim for additional research and development deduction

The taxpayer contracted with an unconnected third party for research and development (R&D) services. In its return for the accounting period ended 31 March 2013 it claimed relief for subcontracted R&D although no payment was made to the contractor in that year.

HMRC allowed the normal corporation tax deduction but not the additional one. This was because the taxpayer must have paid the subcontractor to obtain the extra relief. Further the taxpayer was out of time to amend the return to include any later payment.

The taxpayer appealed. It said the reason for not paying the subcontractor was lack of cash. But it disputed that sums paid after the statutory time limit for a claim did not qualify for relief. In support the taxpayer quoted para CIRD 82100 of HMRC’s Corporate Intangibles Research and Development Manual: ‘Where the underlying...