(1) Part 29 of the Principal Act is amended in Chapter 2 -

(a) in section 766(1)(a) by deleting "and", where it last occurs, in subparagraph (IA) of paragraph (iii) of the definition of "expenditure on research and development" and by inserting after that clause -

"(IB) expenditure on research and development shall not include -

(A) except as provided for in subparagraphs (vii) and (viii) of subsection (1)(b), any amount paid to another person to carry on research and development activities, or

(B) expenditure incurred by a company in the management or control of research and development activities where such activities are carried on by another person,

and 'in the carrying on by it of research and development activities' shall be construed accordingly, and",

(b) in section 766(1)(a) by inserting the following after the definition of "group expenditure on research and development":

"'key employee' has the meaning ascribed to it by section 472D;",