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Guidance on research and development – overseas

26 February 2024 / Jenny Tragner
Issue: 4926 / Categories: Comment & Analysis , apportionment scheme , R&D relief , International
Good guidance – as far as it goes: Part 1

Key points

  • The restrictions on overseas R&D only impact expenditure on externally provided workers and subcontracted R&D.
  • Suggested cost apportionment methods include splits based on number of UK versus overseas workers proportions of salary or number of days worked.
  • Guidance published so close to the deadline gives businesses little time to prepare.

Draft guidance on overseas research and development (R&D) activities and contracted out R&D published by HMRC in early February continued a welcome trend in R&D tax relief following last October’s Guidelines for Compliance (GfC3). Like GfC3 the latest draft guidance includes specific examples to illustrate how complex technical points will be applied in practice.

While a positive step critics might argue that the draft guidance comes far too late. The rules covered will apply for accounting periods beginning on or after 1 April 2024 – just one month after consultation on the draft guidance closes.


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