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R&D tax relief for UK subsidiaries

A UK development or engineering team can generate a taxable credit worth around 15% of qualifying spend under the merged R&D scheme. Since 2024 most overseas subcontracted work is excluded — which changes how groups should structure UK R&D.

From £1,500per claim · or a percentage of the benefit, agreed in advance

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For accounting periods from 1 April 2024 the UK has a single merged scheme: a 20% expenditure credit, taxable, worth about 15% net for a company paying 25% corporation tax, or 16.2% for a loss-maker. Loss-making R&D-intensive SMEs can instead claim an enhanced rate. Qualifying costs are staff, subcontractors, software, consumables and cloud; costs of work done outside the UK are generally excluded unless it could not reasonably have been done here.

Claims must be notified in advance for first-time claimants, filed with an additional information form, and are increasingly checked by HMRC. Group structure matters: a UK subsidiary doing R&D for its parent on cost-plus can still claim on its own qualifying costs, but the contract and the intercompany agreement need to say the right things.

We assess eligibility, structure the intercompany arrangement so the UK company is entitled to claim, prepare the technical narrative and the cost schedules, and file the claim with the CT600.

What’s included

Eligibility and group-structure review
Claim notification for first-time claimants
Technical narrative and qualifying-cost schedules
Additional information form and CT600 amendment
HMRC enquiry support
Intercompany agreement wording for R&D subsidiaries

How it works

What happens, in order

Assess

What the UK team does, whether it meets the definition of R&D for tax, and which costs qualify.

Prepare

Narrative, cost schedules and forms prepared and reviewed with your engineers.

File

Submitted with the CT600; credit paid or offset against corporation tax.

When you need this

Who this is for

UK subsidiaries with engineering, product or scientific staff — particularly US, Indian and Israeli technology groups that have placed development teams in the UK.

Common questions

Can a UK subsidiary of a foreign parent claim R&D relief?

Yes, on its own qualifying UK costs, provided the contractual arrangement means the UK company bears the R&D rather than merely being paid to do it. The intercompany agreement is decisive.

What is the merged R&D scheme rate?

A 20% taxable expenditure credit — roughly 15% net for a company paying 25% corporation tax. R&D-intensive loss-making SMEs can claim a higher rate.

Can we include developers in India or the US?

Generally no. Expenditure on work carried out overseas is excluded unless the conditions for doing it in the UK were not present.

What is the deadline?

Two years from the end of the accounting period. First-time claimants must notify HMRC within six months of the period end.