Qualifying R&D costs
Only eligible expenditure attributable to qualifying R&D activity can enter a claim, and the rules depend on the accounting period and contractual arrangements.
Key points
- Staffing costs can include relevant salary, employer NIC and pension contributions.
- Externally provided workers and contracted-out R&D have specific conditions and apportionment rules.
- Software, consumables, data and cloud computing may qualify when used directly for R&D.
- Overseas expenditure restrictions and connected-party rules require specific review.
Match costs to qualifying activity
Start with the qualifying project boundaries, then identify the people and resources used to resolve the scientific or technological uncertainty. A broad percentage applied to all innovation spending is not a substitute for a supportable allocation.
Review each cost category
Payroll records, invoices and contracts should be reconciled to the accounts. The contract and who initiated the R&D can affect the treatment of contracted work under the merged scheme.
- Employees and qualifying staffing costs
- Externally provided workers
- Contracted-out R&D
- Software licences, data and cloud computing
- Consumable materials and certain payments to clinical-trial volunteers
Check restrictions for the period
Rules changed for accounting periods beginning on or after 1 April 2024. Overseas expenditure, subsidised work and contracting arrangements should be reviewed against the legislation and guidance applicable to the exact period.