Elegible Costs

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PAYE & NI Contributions

R&D Tax Credits include costs incurred by employees on qualifying activities. Employees who are included for the purposes of determining qualifying activities, will be those whose time spent on R&D, as suitably defined, and which can be identified and apportioned over the accounting period(s) claimed.

Definitions for time-cost apportionment are very wide and interpretive and must be clearly understood when evaluating these improvement cost elements.

Sub-Contractors

Additionally, work carried out for external companies or for internal projects qualifies under either SME or LC cost uplift rates. All sub-contractor works should therefore be identified. All costs incurred that fall outside of payroll PAYE costs should be included under this category.

Please note that sub-contractor costs / works are not fully defined under Corporate Intangibles Research and Development (CIRD). Therefore, pragmatically it should be assumed that a cost which is not a payroll cost is a sub-contract cost even if this is not apparent.

Prototypes

In identifying and delivering R&D content and activity, the need to design and construct prototype devices for pre-production, pre-commercial purposes is indicative of qualifying activity in terms of;

  • design,
  • test,
  • resolution of uncertainties,
  • choice of materials and components,
  • proof of function,
  • technological advance,
  • scientific purpose and outcome.

Generally, all test and experimental work should be considered in the process of consideration of a claim, including choice of other component parts, materials and external collaborator or sub-contractors.

Consumables

In R&D claims, consumables are included in costs allowed and can be applied on a proportional basis.

Included for consideration under this category, are utility and other identifiable costs as well as, importantly, software used fully or in part for R&D. Materials and services consumed in tests, prototypes and trials can also be included.

Capital Purchases

Capital machinery purchased for carrying out R&D activities is also a cost to be considered. Not only machinery, plant, and equipment purchased for production, may be considered but also part-used for R&D may be cost apportioned.