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 Can You Claim Tax Credits When You Use R&D Subcontractors? 

Home > R&D Tax Resource Hub > Qualifying expenditure >  Can You Claim Tax Credits When You Use R&D Subcontractors? 

Companies often subcontract some or all of their R&D work to other businesses, but this can affect how much money you can benefit from in your R&D claim. In this article, explore the differences between unconnected and connected subcontractor R&D claims. 

Claiming R&D tax credits as an SME

R&D subcontractor costs differ depending on whether they are connected or unconnected.

Connected subcontractor R&D claim

When you’re connected to an R&D subcontractor, you can claim the smaller of two values:

  1. The qualifying expenditure of the R&D connected subcontractor
  2. Your payment to the R&D subcontractor

Unconnected subcontractor R&D claim

If your business is unconnected from your R&D subcontractor, you can claim up to 65% of the costs – so long as they can be attributed to the R&D project. Please note, you must keep your claims in proportion to the amount of work you subcontracted – so if you have subcontracted part of your project, you can only claim up to 65% of that work and vice versa.

Note that these rules only apply to claims made under the SME scheme.  RDEC claimants are much more constrained in what they can claim in respect of subcontractor payments, with only payments to individuals or to a select list of qualifying bodies being 

What is a R&D connected subcontractor?

Connected R&D subcontractors are when your business has related shareholders with the R&D subcontractor. They can be connected in many different ways, including ownership or a family connection such as a spouse or relative. 

How Ayming can help 

Ayming has over 30 years’ experience in helping clients improve their business performance, with innovative advice and hands-on collaboration. 

Our consultants are industry experts, equipped with the knowledge to help you understand the entire R&D tax credits process and assist you with completing your claim. 

Get in touch with our experts to kick off your R&D tax credit claims today.