A quick guide outlining how to successfully complete the ‘Costs’ section on the EmpowerRD platform.
📖 The estimated reading time for this article is about 5–6 minutes.
In the ‘Costs’ section, you will need to provide as much R&D cost information as possible, including the exact figures for the cost items. To enable you to do this, we recommend that you invite your accountant or the person who is responsible for managing your payroll, invoicing and payments.
If you use Xero to manage your company payments, it is very beneficial to connect your Xero to the platform. The Xero integration enables you to import your R&D costs directly to your claim, saving you time and providing an oversight of your eligible costs. Alternatively, use the CSV template we provide or input costs directly into our platform.
To get started, there are four main sections to be aware of:
Employee Costs
In the ‘Employee Costs’ tab, you will need to enter all of your salaried staff’s information. This includes their full names, job titles (including descriptions where applicable), gross pay and any National Insurance and/or pension contributions from your company. If applicable, you will also need to confirm if they received any reimbursed expenses and bonuses during the claim period.
To find the gross pay, you will need to refer to your employees’ payslips. The gross pay should be the total before any tax deductions have been made. You will also need to disregard any deductions made in respect of the following:
- Statutory maternity and paternity pay.
- Statutory adoption pay.
- Statutory shared parental pay.
- Statutory parental bereavement pay.
- Child tax credit.
- Working tax credit.
If any of these were included in the total figure on employees’ payslips, you will need to calculate the amount and deduct it from the employee’s salary. You should be able to do this by referring to the breakdown on their payslips or liaising with the person responsible for payroll.
You should also inform us of the total figure for your employees’ pensions. This should be for the claim period only. You can find this information by viewing your employees’ payslips; pension details should be included in their pay breakdowns.
💡 Pension contributions should be from the employer only, as you cannot claim for employees’ pension contributions.
Bonuses should be included in the total gross pay. There is also a separate column in the costs table for bonuses, so you will need to inform us which employees received bonuses during the claim period only.
🚨 An employee bonus is only allowable as a qualifying R&D cost if the bonus can be attributed to the R&D project. For example, a sales bonus will not qualify and, therefore, shouldn’t be included in your employee costs. However, if a CTO receives a bonus for the completion of an R&D project, this can usually be considered as part of their total qualifying pay under s1124 CTA 2009.
If you received any grants, you will need to inform us if any staff salaries were funded by these and, if so, provide a percentage of the salary that was grant-funded. For example, if an employee’s salary was £50,000, and £25,000 was funded by a grant, you will need to enter 50%.
Employee costs should not include recruitment fees.
External Worker Costs
In the ‘External Worker Costs’ tab, you will need to enter all of your contractors’ and/or externally provided workers’ information. This includes their full names, job titles (including descriptions where applicable), as well as the amount they received during the claim period. To confirm if they are a contractor or externally provided worker, you will need to select the applicable option from the ‘Cost Category’ drop-down.
You will need to confirm if any of your contractors and/or externally provided workers are UK-based. It is important to tell us if they are UK based due to the HMRC changes affecting overseas workers, due to take effect from 2024. It is also incredibly helpful to confirm if you have invoices for these workers; invoices are very helpful to have in the event of an enquiry, where HMRC may ask for additional information or evidence of payments.
In addition to the above, it is very important to confirm the connection your company has to the contractor. If they are connected, you will be able to claim 100% of their costs. However, unconnected contractors’ costs are capped at 65%. To determine if your contractor is connected or not, you should consider if any individual or company has ownership or control over your company. Individuals or companies are generally considered to have ownership or control if they have shares greater than 50% in your company. If this is the case, they will be considered as connected.
Similarly to employee costs, you will need to confirm if any contractors and/or externally provided workers are grant-funded and, if so, provide the amount that was funded by the grant.
Consumable Costs
In the ‘Consumable Costs’ tab, you will need to enter all of the consumable costs incurred during your claim period. Consumable costs refer to materials or items that have been ‘used up’ or ‘transformed’ during the R&D project/s. These can include the following:
- Electrical components.
- Research prototypes.
- Software licenses.
- Utilities (electricity, gas, water).
💻 For claims with accounting periods on or after 1 April 2023, you can now claim for cloud computing services, such as cloud software and AWS hosting. Here, an apportionment should be applied to reflect the R&D use only.
Consumable costs should not include items such as postage, stationery or lighting.
All consumables costs should be added, excluding VAT.
Other Costs
You may have other types of costs that you have incurred during your claim period. Costs entered here will be assessed on an individual basis.
Examples of these costs can include:
- R&D training.
- Technologies used for R&D.
- Books and other learning materials used for R&D.
- Any other costs that are relevant to R&D.
- These costs should not include any marketing and sales expenses or legal fees.
To include these in your costs, you can add these to the ‘Consumable Costs’ tab on the platform.
Other Relevant Payments
Research Contributions
Large companies can claim for research contributions. Research contributions are payments made to third party organisations who conduct research on your company’s behalf. In order to qualify to claim for this cost, this research must:
- Be relevant to your field or scientific pursuit.
- Be an individual or partnership of individuals.
- OR be a qualifying body, such as a charity, higher education institute or a named scientific research body. These normally need to be based in the UK, but it is worth checking this with HMRC.
Clinical Trial Volunteers
Clinical trial volunteers are often essential for pharmaceutical R&D projects. You can claim for attracting clinical trial volunteers and also, the costs associated with paying for them. As per HMRC’s rules, you cannot claim for this cost under employees, external workers or consumables, therefore this cost has to be claimed under a separate category of relevant payments.
🔬 The exception to this is when an SME company carries out an R&D project and subcontracts the clinical trial element of the project to another company; they can then claim this cost under the normal subcontracting rules, as per CTA09/Ss 1133 – 1136.
Similarly, if a large company subcontracts clinical trials to another UK company, then that company will normally be able to claim the cost under the large company scheme.
Question not answered?
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