refers to existing intellectual property or know-how already developed. When a “Acquiring” company (Company A) provides R&D on behalf of another company (Company B) that Company B will retain the rights over, this should not be considered as acquiring intellectual property or know-how, and is valid R&D expenditure for company B only. On the other hand, if company A carries out R&D and claims the tax credit, and then sells the R&D asset to company B, expenditure incurred by company B on acquiring company A’s existing R&D asset should be excluded from cashing out R&D tax losses. Further guidance on this will be provided. Recommendation That the submission be Issue: Clarify references to contractor” in definitions of “external “R&D expenditure” and material” “R&D Submission (Matter raised by officials) The use of contractor” in the definitions of R&D consideration” in “external “contractor proposed section MX 3 and material” in section YA 1 be confusing as they refer to “R&D different parties of a respective contract. Comment It should be clarified which party is the contractor company (Company A above) that is doing R&D on behalf of the contracting company (Company B above). Recommendation That the submission be accepted. Issue: Clarify who the user of R&D material is when providing a service of R&D to a third party Submission (New Zealand Law Society) In the definition of material”, the user of the R&D in the contracting situation should be “R&D clarified. The words the recipient or, if the recipient is a member of a group of companies, “by by a member of the group” after used” has been suggested. “are Comment An addition similar to that suggested above would provide further clarity that when a company (Company A) performs R&D on behalf of another company (Company B), that provision of R&D by company A (or provision by another group member) is not considered material” “R&D for Company A for the purposes of cashing out R&D tax losses. Company B can consider this material” though. “R&D
“Acquiring” refers to existing intellectual property or know-how already developed. When a company (Company A) provides R&D on behalf of another company (Company B) that Company B will retain the rights over, this should not be considered as acquiring intellectual property or know-how, and is valid R&D expenditure for company B only. On the other hand, if company A carries out R&D and claims the tax credit, and then sells the R&D asset to company B, expenditure incurred by company B on acquiring company A’s existing R&D asset should be excluded from cashing out R&D tax losses. Further guidance on this will be provided. Recommendation That the submission be Issue: Clarify references to “external contractor” in definitions of “R&D expenditure” and “R&D material” Submission (Matter raised by officials) The use of “external contractor” in the definitions of “contractor R&D consideration” in proposed section MX 3 and “R&D material” in section YA 1 be confusing as they refer to different parties of a respective contract. Comment It should be clarified which party is the contractor company (Company A above) that is doing R&D on behalf of the contracting company (Company B above). Recommendation That the submission be accepted. Issue: Clarify who the user of R&D material is when providing a service of R&D to a third party Submission (New Zealand Law Society) In the definition of “R&D material”, the user of the R&D in the contracting situation should be clarified. The words “by the recipient or, if the recipient is a member of a group of companies, by a member of the group” after “are used” has been suggested. Comment An addition similar to that suggested above would provide further clarity that when a company (Company A) performs R&D on behalf of another company (Company B), that provision of R&D by company A (or provision by another group member) is not considered “R&D material” for Company A for the purposes of cashing out R&D tax losses. Company B can consider this “R&D material” though.
2015-or-arrdrm.docx