Records to support this requirement generally relate to the contracts and other agreements between yourself and any parties involved. On review of these documents we should be able to work out who:
- 'effectively owns' the know-how, intellectual property or other similar results arising from your company's expenditure on the R&D activities
- has appropriate control over both the day-to-day management and the overall direction of the R&D activities
- has the financial burden of carrying out the R&D activities.
If the commercial contracts you have entered into do not clearly show this, you will need to keep additional records or include additional clauses in your contracts to clearly show the arrangement between yourself and other parties.
When contracting with a related party, verbal contracts are made. Verbal contracts are recognised contracts under law in relation to commercial transactions. However, it may be difficult to remember the specific details of the agreement for the length of your two or four year review period under tax laws. For this reason, you could make a detailed written record, including (but not limited to) the parties involved, time, place and specific details of your agreement.