1. Staff Costs:
- This includes a proportion of relevant individual salaries, Class 1 NIC, and pension contributions.
- It covers employees who are directly involved in R&D work, including supervisory and managerial time dedicated to directing R&D activities.
- Please note that support staff costs are not eligible unless they are engaged in “qualifying indirect activities.”
2. Externally Provided Workers:
- If you hire workers through an external agency for your R&D project, you can claim relief, but it’s limited to 65% of the payments made to the staff provider.
- Special rules apply if your company and the staff provider have a connection or elect to be connected.
3. Subcontractors:
- The rules for subcontracted R&D vary based on whether your company is classified as a SME or Large Company. Additional rules apply if there is a connection between the companies.
- In general, only 65% of subcontractor costs can be included in your R&D claim.
4. Consumables:
- Costs of items directly used and consumed in qualifying R&D projects can be part of your R&D relief claim. This category includes materials and the proportion of water, fuel, and power consumed during the R&D process.
5. Software:
- You can claim the cost of software that is directly employed in your R&D activities. If the software is only partially used in direct R&D, appropriate apportionment should be made.
6. R&D Tax Webinar:
- We offer a live R&D tax webinar to provide you with a better understanding of qualifying costs. Join our experts to explore the nuances of R&D tax claims.
Non-Allowable Costs:
Unfortunately, certain costs cannot be claimed, including:
- Capital expenditure
- The cost of patents and trademarks
- Rent or rates
- Costs related to the production and distribution of goods and services
When Does Your R&D Activity Start and End?
To accurately allocate costs, it’s crucial to identify the timeline of your project. R&D activity begins when you start working to resolve uncertainty and ends when you solve that uncertainty or stop working on it. Generally, for tax purposes, an R&D project concludes when you have a working prototype but before production starts.
It’s worth noting that if a subsequent version of the project (e.g., Version 2) begins, there may be an opportunity to claim R&D tax relief once again.
At Holland & Co Chartered Accountants, we’re here to guide you through the intricacies of R&D tax claims and help you optimize your financial benefits. Contact us today to explore how we can assist your business.