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< Back to Latest News Studies Article: R&D Qualifying Expenditure

Author: Adam Spriggs

Once qualifying projects have been identified, the next step is to analyse the associated costs of the R&D project(s) and apportioning them if necessary. Cost apportionment is key in demonstrating to HMRC an understanding that not all of the time spent was overcoming uncertainties. However there may well be contracted aspects of the project where the associated costs were fully incurred to overcome an uncertainty.

In late 2020, HMRC consulted on expanding the qualifying expenditure categories, but currently you can claim:

Staffing Costs

Includes salary, employers NIC & pension contributions, bonus, commissions and reimbursed expenses. Benefits In Kind (BIKs) are not included.


Anything ‘used and transformed’ during an R&D project. This may be ingredients during food development or raw materials when developing a product. A proportional amount of utilities can also be claimed but not if company operates out of a serviced office.

You are unable to claim for materials that are ultimately sold to a client, whether that be factory trials that are sold or if R&D was conducted in the construction of a building.


Any software that is specifically purchased for an R&D project or is used partially (eg CADCAM machine) can be claimed. Currently cloud and data costs can’t be claimed but there is a HMRC consultation currently being conducted which may allow these in the future.

Externally Provided Workers

These are third party workers that you have ‘supervision, direction and control’ over. There has to be a minimum tri-partite relationship ie an intermediary, as you cannot contract directly with an individual. These costs are capped at 65%.


Subcontractors are similar to EPWs but don’t require a company to have supervision, direction and control and do notneed to be an intermediary in the contract. Generally they will be tasked orientated to produce a deliverable as part of your own project. These are also capped at 65%.

Companies classified as large (>500 employees, €100m turnover €86m assets) or in receipt of a grant or other notified state aid cannot claim subcontractors unless they are an individual, an all individual partnership or a qualifying body.