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subcontractors tax relief
R&D Tax Credits for Subcontractors

R&D Tax Credits for Subcontractors, Increase your Bank Balance!


t is a widespread misconception that subcontractors cannot qualify for R&D tax relief. This is often not the case. A company cannot claim R&D relief under the SME scheme if it is a subcontractor, however we have found many perceived subcontractor style agreements are actually nothing more than a request from one company to provide a product to a specific specification.

Information on Claiming on R&D Tax Relief

On such occasions R&D tax credits for subcontractors can often be claimed outside of the perceived restrictions within the R&D regime.
A little extra care is required when determining where the claim for relief on a project which uses subcontractors lies, and under which scheme a claim can be made. This is where our specialists can help and we can swiftly conclude on your position. The examples below outline where the commercial subcontractor and the R&D relief subcontractor position differ, and also where the claim was successful.

  • A chemical company A Ltd develops unique formula for licensing out, however to develop specific formulas scientists from another firm B Ltd are utilised. Subject to a few finer details, in this particular instance A Ltd is entitled to make a claim for relief inclusive of the costs incurred utilising B Ltd’s chemists.
  • A software development company D Ltd is engaged by another firm E Ltd to develop a system specific to their requirements. In many instances the R&D relief is available to be claimed by the development subcontractor, here D Ltd. We find this is the case for may contracting companies and the rate of relief available is subject to the finer facts and details of the engagement and contracts in place.


R&D Tax Credit Examples

The HMRC website details additional examples of where R&D tax credits for subcontractors can be claimed. A broad outline of the position of a clear contractor subcontractor engagement can be summarised by the table below:

ContractorSubcontractorWho can claim R&D relief?
Large companyLarge companySubcontractor
Large companySME companySubcontractor
SME companyLarge companyContractor
SME companySME companyContractor


Talk to R&D Tax Solutions in Manchester to Help with your Claim

As you can see from the table above there are various intricacies that can make your R&D claim pass or fail the scrutiny of the HMRC. We urge you to speak to us now and find out in just few minutes the correct approach for your business, instead of spending weeks of your valuable time in trying to understand the ever changing legislation around R&D tax credits for subcontractors.