In the recent case of Gas Recovery And Recycle Ltd v HMRC  UKFTT 746 (TC), the First-tier Tribunal had to consider when the deadline was for payment of research and development (R&D) expenditure in order for it to be included in a valid R&D relief claim.
Requirement for ‘payment’
Any company undertaking qualifying R&D and making an R&D tax relief claim will have incurred expenditure on one or more eligible cost category. Advisers not familiar with the R&D tax relief legislation may be surprised to know that, for some of these cost categories, there is also a requirement that the amount has actually been paid (rather than simply incurred) before relief can be claimed. This is the case for the following categories:
externally provided workers;
subcontracted R&D (SME scheme);
payments to clinical trial subjects; and
contributions to independent R&D (large companies).
The case before the tribunal concerned subcontracting payments, so I will refer to that legislation. The principles apply equally, however, to all of the areas listed.
CTA 2009 s 1051 provides that an SME’s ‘qualifying Chapter 2 expenditure’, on which it is going to claim R&D tax relief, includes ‘its qualifying expenditure on contracted out research and development (see s 1053)’. The pertinent part of s 1053 provides that:
'(1) A company’s “qualifying expenditure on contracted
out research and development” means expenditure:
(a) which is incurred ...