Can pension contributions be included in an R&D tax credit claim?

Yes, employer pension contributions can be included. The pension contribution costs should be proportionate to the amount of time the staff member has spent on R&D. For example, if you decide that your developer has spent 60% of her time on R&D, then 60% of the cost of the employer pension contributions can be included in your claim.

The pension contributions should relate to the employer-side costs only. We also only submit claims for recognised, company-wide pension funds. Although HMRC has no defined limitations on which suppliers of pensions funds are viable, we have sometimes seen other costs categorised as pension contributions in either self-filed or accountant generated claim reports. To ensure that we avoid any such errors we require that pension contributions are clearly traceable back to a recognised supplier. HMRC does not require that the pension fund is based in the UK, we have submitted expenses for funds based outside the UK and EU successfully.

Claiming against pension contributions is increasingly common, as more businesses are committed to employer pensions schemes due to the pension auto-enrollment legislation. This has proved beneficial to clients with large R&D budgets, as they are able to offset the cost of auto-enrollment with a claim against the pension contributions it has entailed.

Beyond the pension contributions, employers can claim the proportionate salary costs, NI contributions, bonuses and some reimbursed business expenses. All of these costs should be totalled and then divided as a proportion of the employee’s time spent on R&D to reach your final employee cost for each individual. For a more detailed discussion of the relevant business expenses that can be claimed, head to our guide on the subject.

For more information about the full range of costs you can include in your R&D tax credit claim, then consult our guide to qualifying R&D costs.