Short answer
Qualifying R&D expenditure is the set of costs you can include in an R&D tax relief claim: mainly staff working directly on R&D, externally provided workers, subcontracted R&D, consumables, software, and data licences and cloud computing used directly in R&D. Capital costs, rent and most overheads are excluded, and since April 2024 payments to overseas subcontractors and workers generally don't qualify.
Key facts
| Usually qualifies | Usually excluded |
|---|---|
| Staff costs (salary, employer NIC, pension) for time on R&D | Capital items (buildings, equipment) |
| Externally provided workers | Rent, rates, general overheads |
| Subcontracted R&D (rules apply) | Patent and legal costs |
| Consumables used up in R&D | Most overseas subcontractor and worker costs |
| Software used directly in R&D | Production and commercial costs |
| Data licences and cloud computing | |
| Payments to clinical trial volunteers |
Staff costs
The largest part of most claims. Include salary, employer National Insurance and pension contributions, apportioned by the time each person spends directly on R&D or on qualifying support activities. Keep time records.
Contractors and subcontractors
Externally provided workers (staff supplied by an agency or another company) and subcontracted R&D can qualify, with restrictions. Under the merged scheme, the company that decides to undertake the R&D generally claims, not the subcontractor. Since April 2024, overseas contractor and worker costs usually don't qualify unless specific conditions apply.
Software, data and cloud
Software used directly in R&D qualifies. Since April 2023, data licences and cloud computing costs attributable to R&D (computing power, data storage, hosting) can also be included.
Record-keeping
HMRC can ask for evidence of every cost. Keep project descriptions, the technical uncertainties tackled, time records and invoices. Good records reduce the risk of an enquiry and speed up any that happens.
Related: R&D Advance →
Related questions
Can I claim for my own time as a director?
Yes, if you are paid through PAYE and spend time directly on R&D.
Do failed projects qualify?
Yes. R&D relief is for the attempt to resolve uncertainty, not for success.