Whereas it has long been accepted that ‘qualifying costs’ for R&D include employee salaries and NICs, an element of uncertainty previously surrounded the issue of reimbursed expenses for travel, mileage and the like.  However, the position was clarified in October 2016 when HMRC revised their guidance (CIRD83200) – extending the definition so that eligible, reimbursed employee expenses now come under the umbrella of ‘qualifying staff costs’.  Please note that only staffing costs of directors or employees directly and actively engaged in the relevant R&D can be considered.  Such staff must be employed under a contract of employment directly with the company concerned.

As a reaction to this historical uncertainty, HMRC are willing to accept amended claims for R&D tax credits from those businesses that restricted their original claim on the basis of previous HMRC guidance.  The company will need to show that the original claim would not have been restricted (to exclude reimbursed expenses) had the company been able to rely on the guidance published in October 2016.  The deadline for these retrospective claims is 31 January 2018.

This opportunity applies to R&D claims for accounting periods ending between 9 October 2012 and 31 January 2016, if the original R&D claim for that period was made on or after 9 October 2014.

The position now – following the October 2016 guidance – is that when claiming tax relief for R&D, the company must show how its figure of R&D related costs was arrived at.  The costs of employees and directors actively engaged in R&D projects can be claimed, along with business expenses reimbursed to those individuals.

In brief, Research & Development tax relief can be used by companies that are developing new or improved systems, processes, services or products in the fields of science or technology.  The research and development must relate to the company’s trade and can be used by both start-ups and more established companies.

Should you feel that this new guidance could impact your historic claims – or should you simply require more information on R&D as a whole – please do not hesitate to contact us or visit our website www.thompsontarazrand.co.uk where further information can be found.

R&D amended claims deadline is fast approaching