Allowable R&D expenses
If your company qualifies for Research and Development (R&D) it’s important to keep accurate records of the expenditure incurred for your R&D projects.
Which costs can your business claim?
The gross wages, national insurance contributions and pension contributions made for your employees who are directly involved in R&D projects can be claimed. Employment related benefits are not included.
External employees and subcontractors
Any employees not directly employed on the books of your company are considered subcontractors for R&D.
Subcontractor expenditure can only be claimed on 65% of the cost.
If you operate under the RDEC scheme your subcontractor costs are not allowable unless undertaken by an education institute, research organisation, individual or partnership.
Your company will often use consumable items when incurring R&D expenditure. These can include but are not limited to materials used for prototypes and utilities such as light and heat.
Your company will also use certain software’s in R&D activity. Any software which is not wholly used for R&D may be apportioned accordingly.
Clinical Trial Volunteers
In the pharmaceutical industry where individuals are paid to participate in clinical trials the expenditure can be included as R&D.
If a prototype is created to test the R&D, this is a qualifying expense. However, if the prototype is readily available for sale the cost is outside the scope of R&D.
Again, an apportionment can be made to determine the qualifying activity here.
Remember, some costs can also seem like they involved R&D but should not be included in your claim.
Production and distribution of goods and services for actual sale is not allowable.
Capital expenditure on plant, machinery and buildings used for R&D activity.
The cost of land used for R&D
Cost of creating patents and trademarks to protect the finished R&D.
KALA ATKINSON ARE A FIRM OF CHARTERED ACCOUNTANTS BASED IN EAST LONDON.
Navigating the world of R&D can be complex. If you need help preparing, documenting or submitting your R&D tax claim, get in touch today.
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