Usually, yes, from either side of the contract, but never from both for the same R&D. When one company pays another to carry out R&D, the current rules are built so that each piece of R&D is claimed once, and the contract decides where it sits — a single contract can even split, with the customer claiming the part it specified and the contractor the rest. The answer therefore depends on which side you sit.
If you pay subcontractors
Payments to unconnected subcontractors qualify at 65% of the portion attributable to R&D undertaken in the UK, so a £10,000 invoice for qualifying UK R&D contributes £6,500 to the claim. Two conditions sit around that rate for accounting periods beginning on or after 1 April 2024. Work done overseas counts only within the narrow overseas exception: conditions necessary for the R&D — geographical, environmental, social or regulatory — that are not present in the UK, are present where the work is done, and would be wholly unreasonable to replicate here; cost savings and workforce availability are expressly excluded as justifications. And the R&D must genuinely be yours to claim: you must not yourself be doing the work under terms that hand the claim to your own customer.
If you are the contractor doing the work
Often you can claim in your own right. For accounting periods beginning on or after 1 April 2024, the customer claims only where it is reasonable to assume, from the contract terms and the surrounding circumstances, that it intended or contemplated when contracting that R&D of that sort would be done. Where it did not, because it bought an outcome and left the how to you, the claim is yours as the contractor. There is a second route in: where the customer is not acting in the course of a trade within the charge to UK tax — typically an overseas customer with no UK trade — or is an ineligible body such as a charity or university, the contractor can claim in its own right. That route matters to UK development houses serving international clients, but it is narrower than “overseas customer” suggests: a UK sole-trader customer is within the charge to income tax, so it does not apply there.
The dividing line is the intention test, and it is objective: contract terms and the surrounding circumstances decide it, not either side’s say-so. A contract that specifies the R&D, prices it and takes its output points to the customer claiming; a contract for a deliverable that happens to require R&D the customer never contemplated points to the contractor. Review the wording before either side claims, because HMRC can ask both sides the same question and the answers need to agree.
Claims for periods that began before 1 April 2024 run on the old subcontracting rules, which differ in important ways confirmed by the First-tier Tribunal; our guide covers those separately for backdated claims.
Where to go next
Our contracted-out R&D guide works through the scenarios in both directions, and qualifying costs covers the 65% rate and its neighbours. If you are on either side of a development contract and unsure who holds the claim, resolve it before filing, not in an enquiry.
Written by Matthew Jones ACA CTA. Last reviewed July 2026.
Sources
- R&D tax relief: the merged scheme and ERIS — the contracted-out rules and UK expenditure restriction.
- CIRD84250: subcontracted R&D, post-tribunal — the old-scheme position for backdated claims.
This page describes the rules as they stood at the review date above, as general information rather than advice on your circumstances. For how that distinction works, see our terms; for an answer on your own facts, talk to us.