When an SME subcontracts R&D work to other SMEs with the same shareholders, it impacts the costs that can be claimed. Typically, when you subcontract R&D work, up to 65% of the costs can be included in your R&D tax credit claim. However, if the subcontractor and your company share the same shareholders (considered connected parties), different rules apply.
For unconnected subcontractors, you can claim 65% of the costs related to the R&D work they perform on your behalf. If only a portion of their services is R&D-related, you can only include 65% of that specific proportion in your R&D tax credit claim.
On the other hand, for connected companies (having the same shareholders), the calculation becomes more complex. The amount you can claim may be more or less than 65%, depending on the actual costs involved. Seeking professional advice is recommended to ensure accurate capturing of these costs.
For R&D work subcontracted to a connected party, you can claim R&D tax credits based on the lower of either the payment you make to the subcontractor or the relevant expenditure of the subcontractor.