B3.703 'Qualifying expenditure'
'Qualifying expenditure' (see B3.702) means capital expenditure incurred by a person on R&D directly undertaken by him or on his behalf if1:
(a) he is carrying on a trade when the expenditure is incurred and the R&D relates to that trade; or
(b) after incurring the expenditure he sets up and commences a trade connected with the R&D
The trade by reference to which expenditure is qualifying expenditure is referred to as 'the relevant trade' in relation to that expenditure2.
References to R&D related to a trade or a class of trades include:
(a) R&D which may lead to or facilitate an extension of that trade
(b) R&D of a medical nature which has a special relation to the welfare of workers employed in that trade3
In Vaccine Research Ltd Partnership v HMRC4, the members of a Jersey limited partnership claimed research and development allowances for expenditure on vaccine research and development. They claimed loss relief totalling more than £192,000,000. HMRC rejected the claims, accepting that a Jersey company (N), which was a member of the partnership, had paid a subcontractor (P) £14,000,000 on research and development, but considering that the partnership had not been trading and that the other partners were not entitled to the allowances which they had claimed. The partners appealed, contending that N had been working for the partnership as a contractor. The First-tier Tribunal reviewed the evidence in detail and