For activity in financial periods starting on or after 1st April 2024, any subcontracted R&D activity that takes place outside UK territory will no longer be claimable within the R&D tax relief schemes. This change also includes the eligibility of costs of externally provided workers (EPW). The new requirement for EPW costs is that the EPW’s earnings must be subject to PAYE and National Insurance.
For subcontractors, there are a limited number of exemptions, but these DO NOT INCLUDE, for example, activity conducted abroad because of cost or a lack of resource availability in the UK.
For more details please refer to HMRC’s guidelines on contracting out rules and overseas restrictions.