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HMRC internal manual

Guidance on the Audit of Customs Values

Assists: price actually paid or payable

Where the seller of the imported goods includes the cost of research and development within the invoice price, there is no provision within the law for excluding the cost of ‘pure research’.

In such circumstances the buyer receives nothing for the payment made other than the goods. Thus the total payment made is regarded as the contract price for the goods and is dutiable in full.

It does not matter if the seller raises a separate invoice for the cost of research or identifies the research cost as a separate line item on the invoice or expresses the research cost as a percentage of the invoice price for the goods.

In all these instances the cost of research is regarded as part of the transaction value for the goods. It does not matter where the research work is carried out. In these circumstances the condition of sale argument applies.

However, if research costs are invoiced separately and the buyer does receive valuable consideration other than the goods, in return for meeting those costs, then such costs would not be dutiable. This may arise where the seller agrees to give the buyer the option to purchase, distribute or manufacture any products which may result from the seller’s research activities.