What Reimbursed Expenses qualify for R&D Tax Relief?

Did you know that HMRC recently relaxed the rules regarding the recovery of expenses incurred by staff in the course of undertaking compliant activity?

Pre-existing legislation meant that staffing costs recognised as qualifying for R&D Tax Credits were limited to;

  • Salaries or wages (including bonuses)
  • Class 1 national insurance contributions
  • Pension fund contributions operated for the benefit of the directors / employees

However, whilst non-cash Benefits In Kind – such as car/fuel allowances, living accommodation remain non-compliant, certain reimbursed expenses may qualify.

What do HMRC mean by ‘reimbursed’?

To be considered ‘reimbursed’, the initial expenditure must have been borne by the employee and then repaid to them by the company.

Which costs qualify?

The cost must be an expense of employing staff, but one that allows the employee to fulfil the requirements of the role; expenses do not qualify simply as a result of having been reimbursed.

It must also have been incurred in actually carrying out the duties of the role; it’s not enough for the expense to be relevant to the job or to put the individual in a position to start work (or remain qualified to do so).

For these reasons, travel and subsistence costs whilst engaged in off-site compliant activity would generally qualify, whereas home-to-work travel and/or training costs would not.

Innovation Tax specialise in helping companies access vital funding and tax incentives to enable their businesses to grow, increase profitability, reduce risk and enable further investment in R&D and capital investments.

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