Research and development: qualifying indirect activities
The definition of R&D has been expanded to include indirect activities - could this be relevant to your claims?
Following recent consultation, HM Revenue & Customs (HMRC) has confirmed that qualifying indirect activities can be included in a company's R&D claim. Final guidance on how claims will be made is still under consultation.
Many companies carrying out R&D could benefit from a cash tax saving either by way of a tax refund from HMRC or additional tax credits as part of the small and medium-sized enterprises scheme.
What are qualifying indirect activities?
Qualifying indirect activities are defined as activities which form part of a project but do not directly contribute to the resolution of the scientific or technological uncertainty. For example:
- time spent by R&D staff in training related to the R&D;
- research by students and researchers carried out at universities;
- the time a maintenance engineer spends repairing equipment used in the R&D (but not time spent maintaining production equipment);
- secretarial time spent supporting the R&D staff (but not time spent supporting those undertaking indirect activities such as the maintenance engineer or non-R&D personnel);
- finance and payroll activity to the extent it relates to the R&D staff.
What you should be doing now?
Companies can make or amend R&D claims within two years of the end of the accounting period. Companies should consider making or amending claims still within the time limit to include expenditure on indirect qualifying activities. For example, a company with a 31 December year end is still within the deadline to amend R&D claims made for the year ended 31 December 2007.
