What Costs Qualify for the RDEC Scheme?

Apogee Associates R&D Tax Credits

The Headlines

R&D costs can be broadly broken down into three categories; Staff, Stuff and Subcons.

Staff time that is spent both directly and indirectly on R&D is typically one of the most significant areas of recovery, and is quantified through salary costs.

Stuff is an imperfect word to describe a category of costs not relating to people’s development time, like materials and software programs; every pound of these costs is a pound of qualifying expenditure.

Subcons are people who you pay to do R&D that are not on your payroll, such as other companies, technical consultants and agency staff; you only get 65% of these cost as qualifying expenditure. There are more detailed rules regarding Subcons for an RDEC application, which are explained in further detail below.

RDEC - The Detail

Staff

Staff
  • Direct and indirect staff costs – this includes salaries, wages, class 1 NIC and pension fund contributions.

Stuff

Stuff
  • Consumable items – materials which are consumed, modified or destroyed in the R&D process. This includes a proportion of water, fuel and power costs.
  • Software – any software that is directly employed in qualifying activities can be recovered. Software that is indirectly used to support qualifying activities can also be recovered.
  • Prototypes – design, construction and testing costs are eligible for recovery providing the prototype is not intended to be sold on. Even if this is the intention, elements of the prototyping may still eligible.
  • Clinical trial volunteer costs – payments made to volunteers taking part in clinical trials.

Subcons

Subcons
  • Contributions to independent research – costs paid to a charity, higher education institute, scientific research organisation, health service body, an individual or partnership of individuals, providing the costs are for relevant independent R&D.