Check what Research and Development (R&D) costs you can claim
Find out which costs qualify for R&D Corporation Tax relief, if you want to claim for your project on your Company Tax Return.
There may be other steps you must complete before finding out what R&D costs you can claim. Check the steps you need to take to correctly claim R&D tax relief.
To find out what R&D costs you can claim, you need to:
- check if the R&D activity qualifies for relief
- check which costs you’re allowed to claim on the activity
- only include costs from the start to the end of your project
R&D starts when work begins to resolve the scientific or technological uncertainty and ends when that uncertainty is resolved, or the work to resolve it stops.
You must have already paid the cost to be able to claim the tax relief. Costs that have not been paid before the claim is made are not eligible.
When your accounting period began affects if you can claim for R&D your company has done on behalf of another company, payments you’ve made to contractors and R&D contributions for independent R&D. Where the rules differ, we’ve explained it in this guidance.
Check which R&D activities you can claim the costs on
You can claim the allowable costs, listed on this page, that relate to your direct R&D activity and that relate to ‘qualifying indirect activities’.
Qualifying indirect activities, are tasks that form part of the project but do not directly contribute to the resolution.
You can claim the allowable costs on the following qualifying indirect activities:
- scientific and technical information services, such as preparing the original R&D findings report
- maintenance
- security — as long as it relates solely to the R&D project
- administration
- clerical activities
- finance and personnel activities
- maintaining R&D equipment including computers used for R&D purposes — if it’s essential to carry out the R&D
- research by students and researchers carried out at universities
- research (including related data collection) to create new scientific or technological testing, a survey or sampling methods, where this research is not R&D in its own right
- feasibility studies to inform the strategic direction of a specific R&D activity
If you’ve received state aid, grants or other financial support (subsidised costs)
For accounting periods beginning before 1 April 2024
If you’re a large company, you must use the R&D expenditure credit (RDEC) scheme to claim the allowable costs listed on this page.
If you’re a small and medium-sized enterprise (SME) you should check if you’ve received a subsidy for each project you’re claiming. If you’ve received a notified state aid you can only claim the allowable costs, listed on this page, using the RDEC scheme.
If you’re a SME and you’ve received any other grant or financial support and the subsidy has not covered all your costs, you:
- can claim for the part that is not covered using the SME tax relief scheme
- may be able to claim for the part that is covered using the RDEC scheme
For accounting periods beginning on or after 1 April 2024
There is no restriction on claiming for subsidised costs under the merged scheme or enhanced R&D intensive support.
R&D your company has done on behalf of another company
In this scenario:
- your company is the contractor
- the company you are doing the work on behalf of is the customer
For accounting periods beginning before 1 April 2024
You can only claim the allowable costs, listed on this page, for work contracted to you by:
- large companies
- a person not liable to UK Corporation Tax
If you meet these conditions all companies (both small and medium-sized enterprises and large companies) must claim tax relief using the R&D expenditure credit scheme (RDEC). You cannot claim using the small and medium-sized enterprise tax relief scheme.
If any other type of person or company contracted the work to you, you cannot claim the costs.
For accounting periods beginning on or after 1 April 2024
This applies to all companies.
Only the company who makes the decision that R&D needs to be carried out can claim the tax relief.
You can claim for the allowable costs, listed on this page, for work you’ve done to fulfil a contract, if you can provide evidence that shows your company:
- made the decision to carry out the R&D
- planned the R&D
The company you’re doing the work on behalf of must not have initiated the R&D or known this needed to be done to fulfil the contract.
For more information read the guidance on new contracting out rules and overseas restrictions.
Staff employed by your company
Staff carrying out work on the R&D project
You can claim staff costs for the time they’ve spent working on the R&D project, this includes:
- bonuses
- salaries
- wages
- pension fund contributions
- secondary Class 1 National Insurance contributions paid by the company
- staff training costs
For example, if a member of staff spends 90% of their time working on R&D activities and 10% of their time working on other activities in your company, you can claim 90% of their salary.
Staff carrying out supporting activities for the R&D project
You can claim a proportion of the staff cost for anyone who carries out work to support the project, but does not directly contribute towards the resolution. These are known as ‘qualifying indirect activities’.
This includes administrative or support staff, for example but is not limited to:
- human resources used to recruit a specific person to work on the project
- specialist cleaning staff
If the staff member has other duties, you can only claim the cost for the time they’ve spent carrying out the task that supported the R&D work. You cannot claim 100% of the staff cost.
Staff costs you cannot claim
You cannot claim for:
- redundancy payments
- staff costs for clerical or maintenance work that would have been done anyway, like managing payroll
Staff supplied by an employment agency or staff provider
These costs are sometimes known as ‘externally provided worker (EPW) costs’.
Read the guidance on new contracting out rules and overseas restrictions, if both of the following apply:
- your accounting period begins on or after 1 April 2024
- the R&D activity takes place abroad
If this does not apply, what you claim depends on if the staff provider is connected to your company.
Staff providers connected to your company
You can claim the lower of either:
- 100% of the staff provision payment made by your company
- 100% of the costs incurred by the staff provider for supplying the workers
If you need help deciding if your company is connected, read CIRD82150 connected persons.
Staff providers who are not connected to your company
You can claim 65% of the staff provision payments made to a staff provider for supplying the workers.
Consumable items
Consumable items are things that are used up in the R&D project.
You can claim for the proportion of consumable items used up in the R&D, this includes:
- fuel
- materials, chemicals or ingredients
- power
- water
You cannot claim the costs if you sell or transfer ownership of the consumable items used up in the R&D.
Software
You can claim licence fees for software used for R&D and a reasonable share of the costs for software partly used in your R&D activities.
If the software is used:
- almost exclusively for the R&D work, a high percentage would be reasonable
- mostly for other tasks outside of the R&D, a much lower percentage would be reasonable
Data licence and cloud computing costs
For accounting periods beginning on or after 1 April 2023, qualifying expenditure includes data licence costs and cloud computing costs.
A data licence is a licence to access and use a collection of digital data.
Cloud computing includes:
- data storage
- hardware facilities
- operating systems
- software platforms
You can claim for most data and cloud computing costs spent on R&D. You cannot claim data and cloud computing costs that are for qualifying indirect activities.
Payments you’ve made to contractors for R&D
In this scenario:
- your company is the customer
- the company or person doing the work for you is the contractor
For accounting periods beginning before 1 April 2024
What you can claim depends on the size of your company or if your project is subsidised.
If you’re a large company, or small and medium-sized enterprise (SME) and you’ve received a subsidy covering all of your costs, contracted expenditure cannot be claimed unless it’s directly undertaken by:
- a qualifying body, for example a charity, higher education institute, scientific research organisation or health service body
- an individual
- a firm where each member is an individual
Where you meet these conditions you can claim 100% of the payment you make to the contractor.
For all other SMEs, you can claim for contractors who carry out the R&D work. There’s no restriction on who carries it out.
For contractors who are connected to your company, you can claim the lower of either:
- 100% of the contractor payment your company made
- 100% of the contractors relevant costs incurred doing the work — this is the expenditure that would have qualified if your company had incurred it
For contractors who are not connected to your company, you can claim 65% of the contractor payment.
To decide if your company is connected to the contractor, read CIRD82150 connected persons.
For accounting periods beginning on or after 1 April 2024
The size of your company and if the project has been subsidised are no longer relevant. But only the company who makes the decision that R&D needs to be carried out can claim the tax relief.
You can claim for the costs of contracting out your own R&D to another person or company, if you can provide evidence that shows your company:
- made the decision to carry out the R&D
- planned the R&D
For contractors who are connected to your company, you can claim the lower of either:
- 100% of the contractor payment your company made
- 100% of the contractor’s relevant costs incurred doing the work — this is the expenditure that would qualify if your company had done the work itself
For contractors who are not connected to your company, you can claim 65% of the contractor payment.
To decide if your company is connected to the contractor, read CIRD82150 connected persons.
You cannot claim contracted costs where the R&D activity takes place abroad, with some exceptions.
For more information read the guidance on new contracting out rules and overseas restrictions.
Contributions for independent R&D
For accounting periods beginning before 1 April 2024
What you can claim depends on which scheme you can claim under. You can only claim using the R&D expenditure credit (RDEC) scheme. You cannot claim using the small and medium-sized enterprise (SME) tax relief scheme.
You can claim contributions made for independent R&D using the RDEC scheme, as long as the person receiving the contribution is:
- a qualifying body
- an individual
- a firm whose members are all individuals
They cannot be connected to your company.
The independent R&D must:
- be relevant to your trade
- not be contracted by your company
For accounting periods beginning on or after 1 April 2024
You can no longer claim this cost for accounting periods beginning on or after 1 April 2024.
Clinical trials volunteers
You can claim for payments made to the subjects of clinical trials, for example new drugs or medical techniques.
Costs you cannot claim
You can only claim the costs listed on this page, you cannot claim for any other costs.
For example, you cannot claim for:
- the production and distribution of goods and services
- capital expenditure
- the cost of land
- the cost of patents and trademarks
- rent, rates or leasing costs
What you need to do next
If you need more information on R&D costs, read CIRD82000 categories of qualifying expenditure.
For accounting periods beginning before 1 April 2024
After you’ve checked the costs you can claim, find out about the rates of tax relief you can claim. There are 2 different types of R&D tax reliefs, depending on the size of your company and if the project has been contracted to you or is subsidised, or both.
You must claim relief under the R&D expenditure credit (RDEC) scheme if you’re a:
- large company
- small and medium-sized enterprise (SME) who has been contracted to do R&D by a large company
- small and medium-sized enterprise (SME) who has subsidised costs
All other SMEs must claim using the SME tax relief scheme.
For accounting periods beginning on or after 1 April 2024
After you’ve checked the costs you can claim, find out about the rates of tax relief you could claim using the merged scheme or enhanced R&D intensive support scheme.