Readers’ forum: Elections for connected persons treatment for research and development

In respect of research and development (R&D) relief claims we are aware that broadly payments to a subcontractor by SMEs are restricted to 65% under CTA 2009 s 1136 unless the subcontractor is a connected person. We are also aware that it is possible to enter into joint election in writing within two years under s 1135 such that s 1134 applies as if the two parties were connected.

Commentary in HMRC’s manuals appears to be limited to a remark under CIRD82000 which simply reiterates the legislation without offering any further background of details.

It is quite possible that we are missing something obvious here but assuming the subcontractor is reporting their income to HMRC can anyone provide further commentary as to any reasons why a contractor and/or subcontractor would not wish to enter into such an election? Are there any inter-party disclosures that...