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A subcontractor is a company or person who is hired by a general contractor (or prime contractor, or main contractor) to perform a specific task as part of the overall project and is normally paid for services provided to the project by the originating general contractor. While the most common concept of a subcontractor is in building works and civil engineering, the range of opportunities for subcontractor is much wider and it is possible that the greatest number now operate in the information technology and information sectors of business.
The incentive to hire subcontractors is either to reduce costs or to mitigate project risks. In this way, the general contractor receives the same or better service than the general contractor could have provided by itself, at lower overall risk. Many subcontractors do work for the same companies rather than different ones. This allows subcontractors to further specialize their skills.
Under UK tax law, certain activities that might appear to be subcontracting are actually treated differently. This is a subtlety of corporate taxation that may easily be missed or misunderstood, and may be relevant to research and development tax relief. Examples of activities that involve outsourced work that do not count as subcontracting for tax purposes include: