Finance Act, 1986

Carrying out of a qualifying research and development project.

23.—(1) Subject to the requirements of this section, a research and development company shall be regarded as carrying out a qualifying research and development project only if it carries out that project on behalf of a qualifying sponsoring company.

(2) A qualifying research and development project is carried out on behalf of a qualifying sponsoring company only if it is carried out in such circumstances that the benefits of the project accrue wholly or mainly to that company.

(3) A research and development company shall be regarded, for the purposes of this section, as carrying out a qualifying research and development project on behalf of a qualifying sponsoring company if, and only if—

(a) any money expended by the research and development company in the course of carrying out that project is so expended at the risk of that research and development company and, without prejudice to the generality of the foregoing, for this purpose money shall not be regarded as expended at the risk of a research and development company if the qualifying sponsoring company on behalf of which the qualifying research and development project is carried out, or any person connected with that qualifying sponsoring company, is or may become, directly or indirectly, liable—

(i) for any expenditure incurred or any losses sustained by the research and development company in the carrying out of the qualifying research and development project, or

(ii) to acquire any shares or assets of the research and development company for a price which is greater than the market value of the shares or assets when acquired, and

(b) it provides satisfactory evidence and it appears to the Revenue Commissioners after such consultation, if any, as may seem to them necessary with such person or body of persons as in their opinion may be of assistance to them and subject to such conditions as to the verification of the purposes for which money is actually expended as they may impose, either on the research and development company or the qualifying sponsoring company, that all money raised by the research and development company from subscriptions for eligible shares by individuals who qualify for relief in respect of such shares was used, is being used or is intended to be used, for a qualifying research and development project.

(4) References to the carrying out of a qualifying research and development project by a research and development company include references to the carrying out of such a project, or of any work comprised in such a project, by any other person, including the qualifying sponsoring company, under a contract between that person and the research and development company.

(5) Notwithstanding paragraph (b) of subsection (3), where the Revenue Commissioners are satisfied that any money which appeared to them under the terms of the said paragraph (b) to be intended for use for a qualifying research and development project was not used for such a project and was not intended for such use, they may give notice in writing to that effect to the research and development company and thereupon the company shall be deemed not to be carrying out and never to have carried out the qualifying research and development project.