Research and Development (R&D) tax relief allows businesses to claim tax credits for certain costs incurred during innovative projects. According to HMRC guidelines, the following costs are eligible for R&D tax credits:
1. Employee Costs:
- Salaries, wages, bonuses, employer’s National Insurance contributions, and pension fund contributions for staff directly involved in R&D activities.
- Includes the time spent on designing, testing, or solving technical challenges.
2. Staffing Costs:
- Payments made to agency workers or externally provided workers engaged in R&D activities.
3. Software Costs:
- The cost of software used for R&D purposes.
4. Consumable Items:
- Materials, utilities, and other consumables used directly in R&D, such as heat, light, and power.
5. Subcontractor Costs:
- A portion of costs paid to subcontractors for specific R&D work (varies depending on the R&D scheme used).
6. Clinical Trial Volunteers:
- Payments made to participants in clinical trials, applicable to pharmaceutical and life sciences sectors.
Exclusions
Certain costs are not eligible, including:
- Production and distribution of goods and services.
- Capital expenditure (although R&D capital allowances may apply).
- Costs related to the patenting or protection of intellectual property.