TL;DR: Third parties in Horizon Europe are entities that contribute to your project without signing the Grant Agreement. 1 Which category an external entity falls into determines how you budget and report their costs — and getting it wrong can jeopardise your funding.
What Are Third Parties in Horizon Europe?
Third parties are entities that contribute to the project but are not part of the consortium of beneficiaries. 1 Beneficiaries are the legal entities that sign the Grant Agreement — they assume direct rights and obligations, receive EU financial support, and are accountable for fulfilling contractual obligations. 3
Third parties do not sign the Grant Agreement. Their responsibilities and rights are mediated through contractual agreements with beneficiaries. 3 They may provide services, resources, or receive financial support within the project. 2
The term covers all parties that are not a beneficiary but execute certain tasks or part of tasks. 6 Four main categories exist, and each comes with its own budgeting and reporting rules.
Types of Third Parties
Affiliated Entities
Affiliated entities — previously called "linked third parties" in some programmes — are entities legally or financially linked to a beneficiary. 3 That connection must pre-date the project and extend beyond it. 3 They can declare their eligible costs directly to the grant, which sets them apart from ordinary subcontractors. 3
There is no strict budget ceiling for affiliated entities, but a very high allocation requires justification — specifically, why the entity did not simply join the consortium as a full beneficiary. 5
Subcontractors
Subcontractors provide services or resources to the project under a contract with a beneficiary. 2 They are a common form of third party involvement in Horizon Europe projects. 1
Their costs flow through the beneficiary that holds the contract, not directly to the grant. 1 The Annotated Model Grant Agreement provides detailed guidance on handling subcontracting arrangements correctly. 1
Associated Partners
Associated partners collaborate on the project without receiving funding. 4 They participate in the work without being formal beneficiaries, which means they have no direct financial relationship with the Grant Agreement. 3
In-Kind Contributions
In-kind contributions are resources provided for free by a third party. 4 They follow specific eligibility and reporting rules within Horizon Europe, so correct treatment from the start matters. 4
How to Budget Third Party Costs
The budgeting approach depends entirely on the type of third party involved. Affiliated entities can declare eligible costs directly to the grant. 3 This means their costs appear in the budget differently from ordinary subcontracting arrangements.
For subcontractors, costs are reported under the beneficiary that holds the contract. 1 When the proportion of the budget flowing to a third party is high, that may indicate the entity should instead be a full beneficiary — and you should be ready to justify the arrangement. 5
Certain third party costs do not need to be declared or specified separately if they fall under the standard rules. 6 Even so, correct classification from the outset is essential because the category determines where and how costs appear in the budget. 1
Reporting Third Party Costs
Affiliated Entities: Direct Cost Declaration
Because affiliated entities are legally or financially linked to a beneficiary, they report costs directly to the grant. 3 This is the key distinction from subcontractors, whose costs are reported by the beneficiary that engaged them. 1
When the budget allocated to an affiliated entity is very high, project managers should be ready to explain why the entity did not join the consortium as a full beneficiary. 5 Document that justification clearly in the project records.
Subcontractors: Reporting Through the Beneficiary
Subcontractor costs run through the relevant beneficiary's accounts. 1 The beneficiary is responsible for ensuring those costs are eligible and correctly documented before they appear in any financial report. 2
Legal and financial accountability always rests with the signing beneficiary — third parties contribute to a Horizon Europe project without taking on those obligations themselves. 2
In-Kind Contributions: Handling Free Resources
In-kind contributions — resources provided at no cost by a third party — require specific treatment in reporting. 4 The rules govern how these resources are valued and declared, so follow the Horizon Europe guidance carefully. 4
Key Rules to Follow
Third parties do not sign the Grant Agreement. 3 All rights and obligations toward them are established through separate contractual agreements with the beneficiary. 3 That structure affects both how you set up the relationship and how you report costs.
When a high proportion of costs flows to a third party, reviewers will expect a credible explanation for why that entity is not a full beneficiary. 5 Document the justification thoroughly in your project records. 5
For affiliated entities, the legal or financial link to a beneficiary must pre-date and extend beyond the project itself. 3 This is a pre-existing structural connection — not a relationship created for the project. 3
Practical Steps for Project Managers
Start by identifying every external entity that will contribute to the project and determining which category of third party they fall into. 1 The category — affiliated entity, subcontractor, associated partner, or in-kind contributor — sets the applicable rules for budgeting and reporting. 4
For affiliated entities, confirm the legal or financial link pre-dates the project before declaring their costs directly to the grant. 3 For subcontractors, check that the contract sits with the correct beneficiary and that costs will be reported through that beneficiary's financial statements. 2
Where in-kind contributions are involved, follow the specific Horizon Europe rules for valuing and reporting resources provided for free. 4 The Annotated Model Grant Agreement is the authoritative reference for deeper guidance on each arrangement. 1
When allocating a high share of the budget to any single third party, write down your justification early. 5 Reviewers will expect a clear explanation for why that entity is not a full consortium member. 5