Eligible R&D Costs
Before identifying your costs you'll need to ensure that your business activity constitutes R&D. In order to do that we recommend reading our guide on the subject. If you're able to make a claim then you'll need to decide which costs you can associate with each R&D project. This guide takes you through the most common costs businesses associate with their R&D tax credit claim:
You can claim the salaries of staff directly involved with the R&D project. Staff costs can also include class 1 NI contributions, employer pension fund contributions, bonuses and some reimbursed expenses.
Items that are directly employed and consumed in the R&D projects can also qualify. This includes physical materials and hardware as well as utilities such as the cost of power, water and fuel used directly for carrying out R&D.
Software that is directly employed in the R&D projects can also qualify. If only a part of the software was used directly in R&D, then an appropriate proportion of the cost of the software can qualify.
The costs of testing the design and construction of a prototype following an R&D project will normally qualify. Note that if the prototype was created with the view of selling it after its construction then HMRC considers this to be outside the R&D scheme (even if R&D was undertaken to construct the prototype).
These are the staff costs paid to an external company for staff who are directly involved with the R&D project. They are not employees or subcontractors. You can claim up to 65% on the payments made to the external staff provider.
As a rule of thumb, you can claim for 65% of the payments made to "unconnected" subcontractors in the SME scheme. However, you can qualify between 0-100% of the expenditure if the subcontractor is a connected party (i.e. a parent company, a subsidiary etc.).
Large companies can claim this as an eligible R&D cost. The research must be relevant to your field or scientific pursuit. It should also be conducted either by an "individual or partnership of individuals", or "a qualifying body". A qualifying body would be a charity or higher education institute, or a named scientific research body.
Attracting volunteers into a clinical trial is often an expensive process. The costs associated with both attracting and paying for volunteers can be claimed for.