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If there is a contract between two persons for R&D activities to be carried out by one of them for the other, the work has been 'subcontracted' or 'contracted out'. Where the necessary conditions are met, R&D tax relief may be available to a company which has subcontracted work out to another person or, in more limited cases, to a company to which activities have been subcontracted.

The rules determining where relief is available for subcontracted R&D have been substantially amended (and simplified) for accounting periods beginning on or after 1 April 2024¹. This article deals with accounting periods beginning before that date. For the rules which apply from April 2024, including a summary list of the changes, see D1.413.

For accounting periods beginning before 1 April 2024, R&D tax relief depends on whether the claimant company has contracted out the R&D work or the work has been contracted out to the claimant company, it also depends on whether the claimant company is an SME or a large company. The amount of relief may