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How to justify subcontracting work to secure your CIR / CII?

December 14, 2023

Which employees can be included in your CIR / CII?

It is essential to justify the amounts spent on subcontracting or outsourced R&D, since they account for around 15% of the budget allocated to the research and innovation tax credit (CIR and CII).

Our experts would like to draw your attention to the fact that the following assumption is not always correct: "the simple attribution of an invoice to an eligible project automatically confers the same status", if you wish to secure your CIR / CII declaration. Follow our specialist's advice to find out more!

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How do you justify the eligibility of your outsourced R&D work?

In addition to demonstrating that the people involved in your project are eligible in terms of skills and tasks, it is equally important to prove that the work covered by a subcontracting invoice is eligible.

We generally identify two categories of intervention :

1. the work is carried out by a subcontractor

The invoicing of a service is considered eligible for the CIR / CII when work entrusted to an approved service provider and are essential for carry out the R&D&I project directed by the customer.

In the case of a tax audit, the auditor will focus his investigation on several elements to verify this:

CIR or CII approval certificate issued by the MESRI for the service provider, recognizing its competence to intervene in a research and development or innovation project;
The contractwhich must clearly specify the work entrusted to the service provider and be consistent with its execution;
The invoicewhich must show the precise wording and breakdown of the amount, and be consistent with the contract and the work performed;
The service provider's deliverablesThese must be integrated into the description and justification of the customer's project.

2. subcontracted work is carried out by the company itself

Despite the fact that this is a subcontracting expense where the employee joins the client company's teams to carry out his work, it is important to refer to the same evidence as described for internal personnel costs (see article : CIR & CII: how to optimize and secure your tax credit?).

This means prove that the service provider is qualified and has carried out operations essential to the R&D or innovation project.

It is therefore essential to provide a personalized justification of your workSimply having worked on the project will not be considered a valid argument without further clarification.

A word of caution: the auditor often questions this type of expenditure.This is because it is perceived as support in terms of capacity (a need for temporary manpower) rather than specialty (a need for expertise).

Our action set a precedent: during proceedings before the Paris Administrative Court of Appeal (28/06/2022, N° 21PA04372, Affaire ARKAMYS), we succeeded in defend the value of employees working on site, by presenting a detailed table of the number of hours devoted by each valued employee. This table was created from data extracted from a software program that tracks project progress by breaking down tasks, components and time spent, and assigning them to developers.