Research and experimental development on social sciences and humanities

While ISIC 722 is a Qualifying Activity under R&D provisions, the FTA applies the 'Modified Nexus Approach'. Forensic scrutiny focuses on the 'Qualifying Expenditure' ratio. If the R&D does not result in legally protected or 'patent-equivalent' IP, or if it lacks a systematic 'experimental' component (as defined by the Frascati Manual), the income may be recharacterized as non-qualifying service income.

Audit Red Flag

Reclassification of standard commercial market research or management consultancy as 'experimental development' to exploit the 0% regime.

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