Does it matter who pays for the R&D?

The short answer is that yes, it matters who pays for the R&D if your company falls under the definition of an SME (small and medium sized enterprise), but not if your company falls under the RDEC. 

Under the SME scheme, companies can’t claim R&D tax credits for subsidised R&D. SMEs looking to make a claim for subsidised R&D work performed for a large company can however, make a claim under the RDEC scheme. 

Under the RDEC scheme, it doesn’t matter who pays for the R&D, as companies can claim for the work that they do. However, companies under the RDEC scheme can’t claim for R&D projects that have been given to other companies, only work that has been subcontracted out to individuals, groups, certain organisations or universities. 

For companies whose accounting period begins before or after April 1st 2024, SMEs can still only claim for subsidised R&D performed for large companies, and not subsidised R&D for fellow SMEs. This is in accordance with the new merged scheme.