The area of subcontractors and their inclusion within the R&D claim can be complex.  Our team is experienced in the range of arrangements our clients enter into.  We can clearly identify who, if anyone, in the chain can claim R&D relief for their involvement on the project.

SME Companies

  • Can include 65% of subcontracted costs.
  • If subcontractors are connected the cost needs to be adjusted to the lower of the invoice value and 65%.

Large Companies

  • Can only include subcontractors if the they are
    • a qualifying body, or
    • an individual, or
    • a partnership, each member of which is an individual

If a SME company is contracted by a large company to undertake activity on its R&D project, but the Large company cannot claim R&D tax relief on the cost e.g. because it is also a company, then there is a possibility that the Contracted To SME can claim under the RDEC regime.

The actual work carried out by the subcontractor does not need not be R&D when considered independently and does not need to be in the UK.  An example HMRC’s guidelines use is the testing element of a R&D project.  If for example the testing of a product is subcontracted to out to someone with the relevant machinery to undertake the testing, where the testing could be established and routine, the subcontracted work will count as R&D, because it is one component of a larger project that is R&D.

The actual work carried out by the subcontractor does not need not be R&D when considered independently.  An example HMRC’s guidelines use is the testing element of a R&D project.  If for example the testing of a product is subcontracted to out to someone with the relevant machinery to undertake the testing, where the testing could be established and routine, the subcontracted work will count as R&D, because it is one component of a larger project that is R&D.

Contractor Subcontractor Who can claim R&D relief?
Large Company Large Company Subcontractor
Large Company SME Company Subcontractor
SME Company Large Company Contractor
SME Company SME Company Contractor
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Working with R&D Tax Solutions enables your service offering to be extended without jeopardising client service or quality. We are the trusted R&D partner for a variety of businesses. Our team enables the partnerships to flourish with clear transparency of services provided and benefits obtained. Whether you are a boutique consultancy with a select few clients, or an accounting practice with a wide variety of clients our team will give you the peace of mind that your clients interests are our priority.

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0161 298 1010