Sub-domains work when the domain is hosted in the same serving environment. I.E. The sub-domain's IP address has to be the same as the domain's IP address.
NOTE: DO NOT add your new subdomain to the primary account name. i.e. newdomain.primaryaccountname.co.uk
This is how (add-on) domains are created so you're not adding a sub-domain at all if your new domain (sub-domain name) already exists.
If your domain is administered through another registrar. You'll have to add another 'A' record for the sub-domain.
i.e. dev.anotherwebsite.co.uk to point to 220.127.116.11 (use your IP address)
TOP TIP: Use the primary domain within C-panel to serve sites under development. Change the sub-domain so that it doesn't match the url allocated for "add-on" domains. Do this by adding "dev-" to the new sub-domain.
i.e. "dev-websitename.primarydomainname.biz" etc.