Taxes Consolidation Act 1997 section 472D

Relief for key employees engaged in research and development activities

Section 472D provides relief for key employees engaged in research and development activities by allowing their employer to surrender all or part of its R&D tax credit for the employee's benefit.

• A key employee must spend at least 50% of their working time on R&D activities, must not be a director, and must not hold more than 5% of the company's ordinary share capital; the employer surrenders its R&D tax credit to reduce the employee's income tax liability in the following tax year.
• The surrendered credit cannot reduce the employee's effective rate of income tax below 23% of total income; any unused balance is carried forward to subsequent tax years until fully used or until the employee leaves the company.
• The surrendered amount is exempt from income tax in the employee's hands; however, the employer must be fully up to date with its PAYE remittance obligations before any reduction in tax can be given.
• An employee claiming relief under this section is required to file a self-assessment income tax return for every tax year in which the credit is claimed, including years in which carried-forward credit is used.