Knowledgebank: Expenditure

R&D Tax Relief, Research and Development, Expenditure

The UK depends on economic prosperity to expand and innovate in technical and science research and development activities. It is for this reason that the UK Government launched a strategy to innovate research and development activities especially in SME’s that would boost the county’s future economic growth.
There is however, the question of what qualifying expenditure is eligible for R&D tax relief. This question is answered below.

What are the qualifying costs for R&D tax relief?

The majority of your day to day operational costs are eligible for R&D tax relief claim. This is only expenditure on revenue and does not include anything you spend on capital such as land or fixed assets. The costs that make up the revenue expenditure are

  • Staff salaries and wages
  • Subcontractors tasked with research and development activities
  • EPWs or externally provided workers
  • Any payments made towards clinical trial subjects
  • Consumables like electricity, water and fuel
  • Software development
  • Materials used in construction
  • Prototypes

Is it possible to identify how much research and development is completed by each staff member?

Yes, it is possible to identify how much each staff member contributes to research and development activities in the company. One of the ways to determine this is by keeping records of all work undertaken by every employee. This will highlight the nature of the activity and the time it took or takes to complete the activity.

Many companies fail to keep records because they only realise the importance after they find out that they are eligible for R&D tax relief claim. The kind of records also differ from company to company and before you make a claim, you should consider what you have that can demonstrate what each employee did involving R&D activities.
If you failed to keep any records in the past, you can estimate the time taken and the activities each staff member did.

Can travel expenses and subsistence costs qualify for R&D tax relief?

Some of the expenses reimbursed to employees are eligible for expenditure R&D tax relief claim. These costs must however relate directly to R&D activities. These expenses include flight costs and others paid for by the employee and later reimbursed by the company.
Note that any expense the company pays for directly is not considered eligible for R&D expenditure tax relief.

Why contact us?

There is a much to learn about the kind of expenditures qualify for R&D tax relief. If you would like guidance, you can complete out a claim form and our team of specialists will take you through everything.
You may have some expenditure that you think do not qualify when they actually do. Visit our website to learn more.