Introduction
The United Kingdom remains one of the world’s leading hubs for research, development, and innovation. To encourage technological advancement and attract foreign investment, the UK government offers generous R&D tax credits to companies undertaking eligible research and development activities.
For overseas businesses operating in the UK—either directly or through a subsidiary—R&D tax relief presents a valuable opportunity to recover a portion of their innovation spend. However, navigating the eligibility rules, structuring requirements, and HMRC documentation process can be complex.
At Fraser Bond, we help international firms access and maximise UK R&D tax incentives with full compliance, strategic planning, and audit-ready claims.
What Are R&D Tax Credits?
Research and Development (R&D) tax credits are a government-backed incentive designed to encourage innovation across all sectors. They provide a cash rebate or corporation tax reduction for qualifying R&D expenses.
The scheme applies to projects that seek to:
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Make an advance in science or technology
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Overcome scientific or technical uncertainty
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Develop or improve products, services, or processes
The UK’s R&D tax credit system includes two main schemes:
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SME R&D Relief – For companies with fewer than 500 staff and under €100m turnover
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R&D Expenditure Credit (RDEC) – For larger companies or subsidiaries of overseas groups
Can Overseas Companies Claim UK R&D Tax Credits?
Yes—under specific conditions.
To be eligible, the R&D activity must be carried out by a UK-based entity that is:
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Subject to UK corporation tax
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Performing qualifying R&D work in the UK (or in some cases, under contract from the UK)
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Paying for eligible R&D-related costs such as staffing, software, and consumables
Overseas parent companies cannot directly claim UK R&D tax relief—but they can benefit through:
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A UK subsidiary conducting the R&D and submitting the claim
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Contracting R&D to a UK business, provided contractual conditions and risk ownership are met
Fraser Bond helps foreign groups structure their UK operations to meet eligibility while aligning with international tax and transfer pricing rules.
Eligible R&D Expenditures Include
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Employee salaries and NIC for staff directly involved in R&D
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Software licences and cloud computing costs used for development
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Consumables and materials consumed during the R&D process
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Subcontracted R&D (limits apply under SME scheme)
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Utilities used in the development facility
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Clinical trials and testing for life sciences companies
Claim Amounts (As of 2025)
SME R&D Relief:
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Up to 27% of eligible R&D spend as cash benefit
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Loss-making companies can surrender losses for cash credits
RDEC Scheme:
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Up to 20% of eligible spend as taxable credit
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Claimed above the line (visible on P&L) for improved investor reporting
The R&D intensity threshold (40%+ of expenditure on R&D) has become more relevant since recent HMRC reforms, especially for smaller businesses.
R&D Tax Credits – Structuring Considerations for Foreign Companies
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Set up a UK limited company liable to UK corporation tax
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Ensure that the R&D is carried out in the UK or supervised by UK-based staff
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Maintain detailed documentation, including project logs, cost breakdowns, and technical justifications
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Consider intercompany contracts and transfer pricing impact when the UK subsidiary is part of a global group
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Seek specialist support for first-time claims or high-value submissions that may attract HMRC scrutiny
Fraser Bond works with specialist R&D tax consultants to prepare compliant, defensible claims that maximise returns.
How Fraser Bond Supports R&D Tax Credit Claims
Our comprehensive services for international businesses include:
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R&D project identification and eligibility review
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UK entity setup and corporation tax registration
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Structuring advice for contract and group R&D activities
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Technical documentation and cost apportionment preparation
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HMRC submission management and claim tracking
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Audit support in the event of an HMRC enquiry
We align your R&D tax planning with broader UK entry, legal, and operational strategies.
Conclusion
The UK’s R&D tax credit regime offers substantial benefits to overseas companies with innovative UK operations. With proper structuring and expert support, your business can recover a significant portion of its development spend while building credibility with stakeholders and regulators.
Fraser Bond provides strategic, end-to-end assistance to help foreign companies unlock R&D tax relief in the UK—ensuring full compliance, maximum value, and long-term innovation success.
