What expenses qualify for Research & Development tax relief?


If your company undertakes research and development,
you could be eligible for tax relief on the day-to-day running costs associated with R&D.
Your company may claim for the cost of software if it is provided solely for the R&D project.
Consumable items can be claimed if they’re used up or transformed in the R&D activity,
for example, a portion of your water or power bills could be eligible. You can also claim
staff costs. Workers are grouped into three categories: employees, subcontractors and
externally provided workers. Each have their own conditions so let’s have a look: Employees
have a contract of employment with your company. They aren’t consultants or agency workers.
For those employees directly involved in carrying out R&D, your company can claim expenses such
as wages, National Insurance and pension fund contributions. Subcontractors have a contract
with your company for the R&D activity they’re carrying out. You can claim 65% of subcontractor
costs. However, different rules apply when a contractor is connected to your company,
so make sure you read the guidance online if this applies to you. Externally Provided
Workers are employed by an agency or another company that provides workers for your company.
You can claim some costs for those who are working directly in R&D, but you can’t claim
for recruitment costs. In summary, some types of day-to-day expenses associated with R&D
activity are eligible for tax reliefs. Capital costs aren’t eligible but you might be able
to claim for these separately.

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