This article and short video highlight the main principles that determine who can claim contracted out R&D - the Contractor or the Client that hired the Contractor. It's relevant to all R&D claims for accounting periods starting from 1st April 2024.
New RDEC Contracted Out rules determine which party can claim the cost of contracted out research and development activities. It's important to get this right as it varies depending on the specific circumstances.
Key principle
The key principle is that in a contract relationship, the Client can claim the cost of contracted out R&D, so long as the Client intends and initiates the R&D and possesses the expertise to define and control their Contractor’s R&D objectives.
But it’s crucial to understand that if the Client lacks the expertise to define and control the specific R&D required by the Contractor, or does not contenplate or intend that any R&D is undertaken the Contractor may be eligible to claim the cost of any R&D they undertake for a Client as part of contract delivery.
What I’ve outlined above, is a simplified summary. Other pages provide examples of where the Client has the right to claim and where the Contractor has the right to claim the R&D costs.