Qualifying expenditure for R&D tax relief

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Qualifying expenditure for R&D tax relief
  • Qualifying and expenditure for R&D tax relief
  • Staff costs
  • Software
  • Consumable or transformable items
  • Relevant payments to subjects in clinical trials
  • R&D subcontracted out by the company
  • R&D subcontracted to the company
  • Externally provided workers
  • Contributions to independent research
  • Pre-trading R&D expenditure
  • Timing of R&D qualifying expenditure

Research & development (R&D) tax relief is only available for expenditure which meets certain conditions and that falls within certain types of qualifying expenditure. The conditions and types of expenditure are similar for both SME R&D relief and large company R&D relief with some exceptions which are detailed below.

CTA 2009, ss 104J, 104L, 1052
Qualifying and expenditure for R&D tax relief
Qualifying conditions for R&D tax relief

Certain conditions have to be met in relation to the expenditure, it must be:

  • revenue not capital in nature, although capital allowance may be available, see Research and development allowances in the Incentives for investment guidance note (CTA 2009, s 1052)
  • related to a trade carried on or to be carried on by the company, the relief is a corporation tax relief and so is not available to unincorporated businesses
  • allowable as a deduction in calculating the profits of the trade for the purposes of corporation tax
Qualifying types of expenditure for R&D tax relief

Not all expenditure which meets the qualifying conditions is available for R&D tax relief, the expenditure must also fall within certain qualifying categories which are detailed below:

  • staff costs
  • software
  • consumable or transformable items
  • relevant payments to the subjects of clinical trials
  • subcontracted out R&D costs (but for large companies this is restricted ― see below)
  • cost of R&D work subcontracted to the company (this is restricted for both SMEs and large companies, see below)
  • externally provided workers
  • for large company R&D relief only, contributions to independent research

Further detail on these

More on Research and development tax relief: