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.


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.


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.


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.