What Documentation Do You Need to Support Subcontracted R&D Expenditure Claims?

So, What Documentation Do You Actually Need?

If you’re including subcontracted costs in your claim under the new rules, HMRC will want to see that:

• The work really was R&D, meeting HMRC’s definition.
• The subcontractor was carrying out qualifying R&D activity on your behalf, where you are the entity that commissioned the R&D and bore the risk.
• The costs are accurate, directly related to that R&D activity, and eligible under the new “contracted out” rules.
• The R&D took place in the UK, unless a specific exception applies.

Here’s what you’ll need to back it up:

Contracts and Agreements

This is your starting point. You’ll need:

• A signed contract or agreement between your business and the subcontractor.
• A clear description of the R&D work being done, explicitly detailing the technical challenges or uncertainties being tackled.
• Evidence that your business intended or contemplated that R&D of that nature would be undertaken when entering into the contract. This goes beyond mere awareness and implies a clear understanding of the R&D’s nature.
• Clarity on who holds the IP rights resulting from the R&D.
• Details on who bears the financial risk.
• A breakdown of the responsibilities between your business and the subcontractor.

The more specific the contract is about the R&D nature of the work, your commissioning of it, and you assumption of risk, the better.

Invoices and Payment Evidence

You’ll also need:

• Detailed invoices from the subcontractor that break down costs related to R&D.

• Proof that you paid the subcontractor (think: bank statements, receipts).

Make sure the invoices match what’s in your contract and are dated within your accounting period.

Project Plans and Reports

Ask your subcontractor for:

• Project plans or proposals that demonstrate a systematic approach to R&D, outlining objectives, methodologies, and expected outcomes.

• Progress updates or reports that detail the R&D work undertaken, challenges faced, and uncertainties addressed.

• Any documentation that shows a structured, methodical approach to solving technical problems.

This helps prove the work was genuine R&D, not just business-as-usual.

Technical Documentation

Provide evidence of the subcontractor’s involvement in the technical aspects of the R&D, such as:

• Prototypes, schematics, and design drawings.
• Test results or experiment logs.
• Notes on failed attempts or unexpected outcomes.

All of this backs up the fact that there was technical uncertainty involved and that the subcontractor contributed to its resolution.

Communication Records

Don’t underestimate the power of a good email trail or meeting notes. Keep:

• Emails discussing project progress, technical challenges, and solutions.
• Meeting notes or Teams/Zoom summaries, especially those detailing technical discussions or decision-making processes related to the R&D.
• Feedback between you and the subcontractor.

This shows active collaboration, your direction of the R&D, and reinforces the subcontractor’s role in the R&D process.

Evidence of Eligibility

It’s worth showing that your subcontractor was selected for their technical know-how and ability to undertake the specific R&D you commissioned. Think:

• Relevant qualifications or certifications of their personnel.
• Case studies or descriptions of previous projects demonstrating their relevant experience.

This helps justify that they were the right choice for solving your R&D challenge.

Why Does All This Documentation Matter?

We get it. Keeping all this paperwork might feel like overkill. But there are good reasons to take it seriously:

• Stay compliant with HMRC: HMRC expects thorough, accurate evidence, especially for subcontracted work. Without it, you’re increasing your chances of an enquiry, which can be time-consuming and costly. The new “contracted out” rules mean HMRC will be scrutinising claims even more closely to ensure the correct party is claiming.
• Prove what’s eligible: Not everything your subcontractor does will qualify as R&D. Good documentation helps you filter out non-eligible costs and keeps your claim clean.
• Reduce risk of enquiry: The better your records, the less likely HMRC is to raise questions or dig deeper into your claim. Clear, comprehensive documentation demonstrates that you’ve taken reasonable care.

Maximise your claim: Well-documented subcontracted R&D costs can significantly boost your claim value, but only if you have the paperwork to back it up.

Simple Tips for Managing Your Subcontractor Records

Here’s how to make life a bit easier when it comes to documentation:

• Get clear agreements in place from day one: Make sure the contract spells out the R&D elements of the work, explicitly stating your commissioning intent, the technical uncertainties, and who bears the risk and owns the IP. Don’t wait until the end of the project to try to clarify things.
• Use a central document hub: Whether it’s a cloud drive, a project management tool, or a dedicated R&D folder, keep everything in one place and keep it updated.
• Check in regularly with subcontractors: Don’t wait until the end of the project. Schedule regular updates and request supporting documents throughout the process.
• Understand the “contracted out” rules: Educate yourself and your team on the new rules for who can claim for subcontracted R&D.
• Get help from the experts: Working with an R&D tax specialist (like us!) means you won’t miss anything, and your claim will be ready for HMRC review, with confidence.

How TBAT Innovation Can Help

At TBAT Innovation, we’re experts in helping businesses navigate the tricky bits of R&D Tax Relief, including subcontracted costs. We can help you:

• Identify which subcontracted costs are eligible.
• Review your documentation and fill in any gaps.
• Prepare a detailed, compliant claim that stands up to scrutiny.

Whether you’re new to R&D tax relief or just want to make sure your documentation is airtight, our team is here to help.

By keeping solid records, for example, contracts, invoices, technical notes, and communications, you’ll not only stay compliant with HMRC but also give your claim the best chance of success.

If you’re unsure where to start or want a second opinion on your subcontracted R&D documentation, get in touch with our R&D Tax Credits team. We’re here to make the process simpler and help you claim what you’re entitled to.

Related Information: CIRD84250 – R&D tax relief: categories of qualifying expenditure: subcontracted activities – meaning of subcontracted