Staff costs count as qualifying expenditure for your R&D tax credit claim. In this article, discover how to allocate employee time effectively, which records can support your claim, and how reimbursed expenses can also form part of your eligible staffing costs.
In this article
Engagement in qualifying R&D
Your R&D claim should reflect the amount of time your employees spent engaged in qualifying research and development activities. Only staff costs of employees or directors who are directly engaged in relevant R&D projects count.
However, where only a proportion of the employee’s time can be classed as actively engaging in qualifying R&D activities, you can include the relative proportion of time and cost in your R&D tax credit claim.
Indirect and direct staff costs
Eligible staffing costs can fall into one of two categories:
- Activities which directly contribute to resolving a technological uncertainty
- Qualifying indirect activities (QIAs)
An employee’s direct engagement in R&D (and the extent of their engagement) is based on the activities they have performed, and therefore the allocation of the employee’s time should reflect how long they spent involved in qualifying R&D activities during the period you are claiming for.
Note that, from 2023 onwards, you’ll need to separately calculate the proportion of costs included as QIAs as this is to be identified in theAdditional Information Form.
Questions to ask when allocating employee time
- What qualifying R&D projects did your employee work on during that period?
- Of these projects, which qualifying activities did the employee carry out?
- How much of the employee’s total time did these activities take up?
Where possible, the time allocated to R&D activities should be supported by documented evidence and records such as timesheets if available.
Keeping records of staff costs
Although there’s no strict record-keeping requirement for R&D tax credit claims, maintaining clear evidence of staff time spent on qualifying activities is strongly recommended. HMRC expects companies to take a proactive approach to tracking and supporting their R&D costs. In practice, detailed time logs aren’t always feasible, especially for businesses new to claiming. In such cases, a pragmatic approach based on reasonable estimates and supporting evidence will help strengthen and optimise your claim.
Timesheets
Keeping timesheets is one of the simplest and most effective ways to record R&D activity. Consistent tracking not only supports accurate claims but also ensures long-term compliance and maximised benefits. Alongside time records, remember to review other qualifying staff-related costs, such as reimbursed travel or subsistence expenses.
Related reading: Why you should be tracking R&D projects in real time.
Reimbursed employee expenses and your R&D claim
The process of identifying qualifying expenditures for an R&D tax credit claim can be intricate and time-consuming. One area that often causes uncertainty is reimbursed expenses.
HMRC defines reimbursed expenses as costs that are initially borne by the employee and later repaid by the business. If the expense was paid directly by the company (for example, using a company credit card) it does not count as reimbursed.
A business can include reimbursed expenses in their R&D tax credit claim, as long as they are classed as staffing costs. However, just because an employee incurred an expense does not automatically make it a staffing cost.
To include reimbursed expenses within an R&D claim, the cost must be:
- Related to travel and subsistence
- Incurred by the employee, not paid for directly by the company
- Necessary for fulfilling the requirements of the employee’s job
- Directly related to the R&D activities
When an employee incurs an expense that qualifies as a staffing cost and meets the above criteria, a company can reimburse them for it and include them in their R&D claim.
While the guidance clarifies that certain reimbursed expenses incurred during employment are eligible, it excludes other expenses like travel to work and reimbursed training costs.
If your business has a sizeable amount of qualifying reimbursed expenses, like travel and subsistence expenses linked to R&D activities, not including them could significantly reduce the value of your overall R&D claim.
Choosing Ayming as your partner
Being proactive in how you capture and evidence staff time and reviewing reimbursed expenses carefully can make a meaningful difference to your R&D claim. Taking a structured approach to both areas helps ensure your submission is accurate, compliant, and achieves the best possible outcome. At Ayming, we have extensive experience helping businesses identify and document all eligible staffing costs, from time allocation to travel and subsistence expenses.
Our team includes technical and industry experts, who can help you design practical, real-time record-keeping processes and optimise your R&D tax claim.
Reach out to us today to find out how we can help you capture every qualifying cost and unlock the full value of your R&D investment.
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What Counts As Qualifying Expenditure