1. Subcontracted R&D Can Qualify
The Collins Construction case confirmed that R&D work carried out as part of a client project remains eligible for tax relief, provided the R&D costs are not directly reimbursed by the client. This is a significant win for subcontractors who innovate to deliver exceptional results for their clients.
2. Subsidised R&D Can Also Qualify
The Stage One Creative Services case clarified that R&D funded through general client payments is eligible, as long as those payments were not explicitly made for "R&D." This provides greater flexibility for businesses with contracts that encompass broader scopes of work.
Practical Example for Subcontracted Work
Imagine you have a contract with a client to complete a general project. During the process, you identify the need for an innovative R&D project to achieve the desired outcome. If this R&D work was not originally specified in the contract and the intellectual property (IP) remains yours, it qualifies for tax relief—even if the client's general payment covers your costs. The key is that the R&D must not have been directly reimbursed or explicitly included in the original agreement as "R&D work."
Practical Example for Subsidised Work
Imagine your company is contracted to deliver a large-scale project for a client, which includes a variety of tasks such as design, prototyping, and installation. The client pays you a general fee for the entire project, without specifying that any part of it is for "R&D". During the course of the work, you identify that an innovative R&D project is necessary to develop a new process or technology to meet the project’s requirements.
Even though the client’s payment indirectly funds your work, it qualifies for R&D tax relief because the payment wasn’t explicitly designated for "R&D" in the contract. Additionally, if you retain the ownership of the intellectual property (IP) generated, you can claim tax relief on the R&D costs incurred. This clarification provides a clear pathway for businesses to benefit from R&D tax relief in scenarios where broader contracts are in place.
While some might view these changes as a source of uncertainty, at Easy R&D, we see them as a moment to reflect and adapt. This is an ideal time for innovative businesses to review their activities and ensure they’re making the most of available opportunities. Uncertainty often sparks creativity, and we’re here to help you navigate the possibilities.
If your business engages in subcontracted or subsidised R&D work, let us assist you in reviewing your projects to assess eligibility and optimise your claims.
Contact Easy R&D today to see how we can support your R&D tax relief claim. Our team is ready to guide you through the process and help unlock funding to drive your innovation forward.
