The Principal Act is amended in Chapter 1 of Part 15 by inserting the following after section 472C:

"472D.

(1) In this section -

'associated company', in relation to a relevant employer, means a company which is that employer's associated company within the meaning of section 432;

'control' has the same meaning as in section 432;

'emoluments' has the same meaning as in Chapter 4 of Part 42;

'key employee' means an individual -

(a) who -

(i) is not, and has not been, a director of his or her employer or an associated company and is not connected to such a director,

(ii) does not, and did not, have a material interest in his or her employer or an associated company and is not connected to a person who has such a material interest, and

(iii) in the accounting period for which his or her employer was entitled to claim relief under section 766(2), performed 75 per cent or more of the duties of his or her employment in the conception or creation of new knowledge, products, processes, methods or systems,

and

(b) 75 per cent or more of the cost of the emoluments that arise from his or her employment with that relevant employer qualify as expenditure on research and development under section 766(1) (a) in the accounting period referred to in paragraph (a) (iii);