R&D SME claims – have you understood the commercial arrangements?

Two of the most under-appreciated risks when it comes to making a research and development (R&D) claim is that of the claimant company being considered a subcontractor and that the claimant company’s R&D activity is subsidised by their customer(s).

Both of these areas require R&D professionals to have a detailed understanding of what their client is doing and what the commercial realities of the situation are. Whether a claimant company is a subcontractor or whether the R&D activity is being subsidised is closely connected and can overlap – but they are separate points on which qualification for an R&D small and medium-sized enterprise (SME) relief claim can fail.

Often when challenged on these issues claim preparers and claimant companies reiterate in strong terms that the company is undertaking genuine R&D and should therefore be entitled to claim. In most cases it will be evident...