Projects that count as R&D

The work that qualifies for R&D relief must be part of a specific project to make an advance in science or technology. It cannot be an advance within a social science like economics or a theoretical field like pure maths.

The project must relate to your company’s trade - either an existing one, or one that you intend to start up based on the results of the R&D.

To obtain R&D relief you need to explain how a project:

• looked for an advance in science and technology
• had to overcome uncertainty
• tried to overcome this uncertainty
• could not be easily worked out by a professional in the field

Your project may research or develop a new process, product or service or improve on an existing one.

 

Advances in the field

Projects must aim to create an advance in the overall field, not just for your business. This means an advance cannot just be an existing technology that has been used for the first time in your sector.

The process, product or service can still be an advance if it’s been developed by another company but is not publicly known or available.

 

Show that a professional in the field could not work this out

Explanation as to why a professional could not easily work out your advance.

You can do this by showing that other attempts to find a solution had failed.

You can also show that the people working on your project are professionals in that field and asking them to explain the uncertainties involved.

 

Show there was uncertainty

A scientific or technological uncertainty exists when an expert on the subject cannot say if something is technologically possible or how it can be done - even after referring to all available evidence.

This means that your company or experts in the field cannot already know about the advance or the way you achieved it.

 

Explain how you tried to overcome the uncertainty

Demonstrating that the R&D needed research, testing and analysis to develop it.

Explanation of the work carried out to overcome the uncertainty. This can include the successes and failures you had during the project.

 

Work out when the R&D activity starts and ends

The R&D activity starts when you begin working to resolve the uncertainty. You’ll need to identify the technical issues that need to be resolved, and make sure there is not an existing solution that has already been worked out.

The R&D activity ends when you solve the uncertainty or stop working on it. The activity you claim R&D relief for should end once you have a working prototype that solves the problem, and before you go into production.

Your R&D may restart if you find another scientific or technological uncertainty after you’ve started producing the product. If this happens, you can claim for further R&D while you try to resolve it.

Costs you can claim

Companies can claim certain costs on the project from the date you start working on it until you develop or discover the advance, or the project is stopped.

 

Employee costs

For staff working directly on the R&D project, you can claim a proportion of their:

• Salaries/wages
• Employers NI
• Employers pension contributions

Companies can claim for administrative or support staff who work to directly support a project. For example, human resources used to recruit a specific person to work on the project. You cannot claim for clerical or maintenance work that would have been done anyway, like managing payroll.

You can claim 65% of the relevant payments made to an external agency if they provide staff for the project.

 

Subcontractor costs

Companies can claim 65% of the relevant costs of using a subcontractor for your R&D activities.

 

Software

Companies can claim for software licence fees bought for R&D and a reasonable share of the costs for software partly used in your R&D activities.

 

Consumable items

Companies can claim for the relevant proportion of consumable items used up in the R&D. This includes:

• materials
• utilities

 

Clinical trials volunteers

For R&D projects in the pharmaceutical industry, you can claim for payments made to volunteers involved in clinical tests.

 

Types of R&D relief

There are different types of R&D relief depending on the size of your company and whether the project has been subcontracted to you or not.

 

Small and medium sized enterprises (SME) R&D Relief

Companies can claim SME R&D relief if you’re a SME with:

• less than 500 staff
• a turnover of under 100 million euros or a balance sheet total under 86 million euros

Companies may need to include linked companies and partnerships when you work out if you’re a SME.

SME R&D relief allows companies to:

• deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction
• claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss

 

Research and Development Expenditure Credit

Large companies can claim a Research and Development Expenditure Credit (RDEC) for working on R&D projects.

It can also be claimed by SMEs and large companies who’ve been subcontracted to do R&D work by a large company.

The RDEC is a tax credit for 11% of your qualifying R&D expenditure up to 31 December 2017 and 12% from 1 January 2018.