HMRC internal manual

Corporate Intangibles Research and Development Manual

CIRD81470 - R&D tax relief: conditions to be satisfied: subcontracted R&D

What is considered to be subcontracting is dealt with at CIRD84250.

CTA09/Ss1052(5) and 1053(4) - SME scheme

One of the conditions for a company to make a claim under the SME scheme is that the expenditure is not incurred in carrying on R&D activities as a subcontractor.

In some cases the SME company may still be able to make a claim under the Research and Development Expenditure Credit Scheme (CTA 2009/s104C to S104E) CIRD 89750 or (in general for expendtiure incurred before 1 April 2016) the large company scheme (CTA09/Ss1070 - 1073) CIRD89500. This will entitle the company to a taxable payable credit or to a  25% deduction, (30% from 1 April 2008) respectively, for qualifying expenditure. Where a company has made a claim in respect of expenditure under the large company scheme then losses arising from that expenditure can not be surrendered for a payable tax credit (see CIRD90500).

CTA09/S1077(4) - large company scheme

Large companies that have been contracted to carry out R&D activities must have been contracted by either:

  • a large company, or
  • a person otherwise than in the course of a trade, profession or vocation the profits of which are chargeable to tax under Case I or II of Schedule D.