What costs can I include in my R&D Tax Relief claim?

Having given you an idea about how much your claim might be, we left you asking yourself the question “what is an eligible cost for R&D Tax Relief”

When you start on an R&D project you might have put together a budget and identified all of the costs that you might incur on your R&D Tax Relief journey. Just a word of warning a lot of these costs won’t end up in your claim!

So what can you include in an R&D Tax Relief claim?

Staff costs – wages & salaries, bonuses, pension contributions, Employers NI contributions and reimbursed staff expenses for R&D costs (generally Mileage, Travel, Accommodation & Subsistence);

Subcontractor costs – payments to third parties for Research/Development activity;

Externally Provided Worker costs – going to an agency to bring in specialist help on a “short to medium term” basis, this is different from subcontracting as there is usually a person, your company and a third party who employs the person you will using;

Consumable Material costs – if you are developing a prototype you will often have to use materials to develop it. If you can’t then reuse these materials after they have been incorporated into the prototype then they will have been consumed and can be included in the claim;

Software costs – if you have to use specialist software in your research or you are using project management software to manage the R&D team, then you can include a proportion of the software costs;

Utility costs – we can include a proportion of light, heat and water in the R&D claim, provided that some of the R&D has been performed in house; and

Payments to Clinical Trial Volunteers – not something that most businesses will be involved in, but having previously worked for a company that ran clinical trials for global pharmaceutical companies, it is something that I am more than aware of.

Eligible Cost R&D Tax Relief

These costs can be incurred both directly by a person actively involved in the R&D project and indirectly if there is a person who supports the R&D project or a person involved in the R&D project has a role that is indirectly supporting the project. Such as recruiter actively engaged in recruiting a research assistant who will be working on the R&D project and the lead researcher then interviewing the candidates for the role.

The above eligible costs have the potential to create quite a big pot, but there are a long list of costs that we can’t include in the claim that you will have incurred during the project.

These disappointments include:

  • Travel costs, Subsistence payments and Accommodation costs (when paid for on a company credit/debit card or when reimbursed to an employee where the cost isn’t linked to R&D) ;
  • Recruitment Agency Fees;
  • Postage & Stationery costs;
  • Freight costs;
  • Computer & other capital equipment costs;
  • Rent & Business rates;
  • Telephone & Internet charges;
  • Server costs (even if they are only being used for R&D) and the cost of data for testing software;
  • Professional fees;
  • Patent attorney fees;
  • Computer running costs;

So as you can see whilst there are a lot of costs that you can claim, there are plenty more that you might have legitimately incurred in running your Research and Development Project, but they just don’t fall into an eligible category. It is therefore important to get an expert on board to help you make the most of your claim.

Expert help is on hand

Cooden Tax Consulting are a niche tax consultancy that specialise in helping SME business owners determine whether they can benefit from Technology Tax Reliefs, specifically R&D Tax Relief, R&D Tax Credits, RDEC, Video Games Tax Relief & Patent Box.

Contact us on info@coodentaxconsulting.co.uk or phone us on 01424 225345 for more information or to discuss a potential claim.