As financial pressures on UK universities grow, trading subsidiaries are increasingly vital for commercialisation, research funding and revenue diversification. An underused opportunity is R&D tax credits, which allow qualifying companies to reduce Corporation Tax or claim a payable credit on innovation-related spend.
For university finance directors, understanding eligibility and structuring claims effectively can unlock significant value.
University versus trading subsidiary
R&D tax relief is available to UK registered companies subject to Corporation Tax. As such, universities themselves typically cannot claim due to their charitable status, but their trading subsidiaries, structured as limited companies, generally can.
What finance directors need to verify
Qualifying R&D must:
- Attempt to achieve an advance in science or technology;
- Address scientific or technological uncertainties; and
- Relate to the company’s trade and not pure academic research.
Careful consideration must also be paid to:
- Which entity incurs the costs of carrying out R&D.
- Contractual arrangements with your customers.
- The territory in which R&D is carried out.
Opportunity
Under the R&D Expenditure Credit scheme (“RDEC”) eligible projects can receive net tax benefits of approximately 15% of qualifying expenditure. For profitable companies, the credit works to reduce your tax liabilities to HMRC, or in the case your subsidiary has made a tax loss, they can be eligible to receive a cash payment.
Next steps
R&D tax credits present a significant opportunity for trading entities within a wider university group, provided their work is structured, governed, and documented correctly.
For university finance directors, the priority is to:
- Review whether your organisation is carrying out eligible R&D activity.
- Ensure that contractual and group structures support the right to claim.
- The above being satisfied, notify HMRC of your intent to claim within six months of your accounting period end to protect your right to claim.
If any universities believe that they are eligible to make a claim through their subsidiary entities, if that trading entity has its reporting period aligned with the academic year ended 31 July 2025, then they must notify HMRC by 31 January 2026.
If you need assistance in reviewing your R&D activity, customer engagements or group structure, please don’t hesitate to reach out to Richard Weaver, Partner, or Jack Williams, Senior Manager.
