In 2014 HMRC made a change of interpretation in terms of certain indirect activities which were previously considered outside the scope of Research and Development (R&D) relief. This potentially means an increase in the activities which qualify as R&D for tax purposes.

The definition of R&D for tax purposes is set out in the Department of Trade & Industry Guidelines (2004). The guidelines include a number of activities called “Qualifying Indirect Activities”. See R&D Zone: Overheads and indirect activities

The change of HMRC interpretation appears to mean that anything that falls into the category of “Qualifying Indirect Activities”, may now qualify to be part of the R&D tax relief claim. 

“Qualifying Indirect Activities

31. These are activities which form part of a project but do not directly contribute to the resolution of the scientific or technological uncertainty. They are:

(a) scientific and technical information services, insofar as they are conducted for the purpose of R&D support (such as the preparation of the original report of R&D findings);

(b) indirect supporting activities such as maintenance, security, administration and clerical activities, and finance and personnel activities, insofar as undertaken for R&D;

(c) ancillary activities essential to the undertaking of R&D (e.g. taking on and paying staff, leasing laboratories and maintaining research and development equipment including computers used for R&D purposes);

(d) training required to directly support an R&D project;

(e) research by students and researchers carried out at universities;

(f) research (including related data collection) to devise new scientific or technological testing, survey, or sampling methods, where this research is not R&D in its own right; and

(g) feasibility studies to inform the strategic direction of a specific R&D activity.”

According to business advisors, KPMG,  “the inclusion of these activities means that R&D claims now not only encompass direct hands-on development, but can also include the time and costs of people in support of those development activities, such as administrative or finance staff. Additionally, it may also increase the proportion of time of technical staff that is claimed for, as technical staff are likely to undertake some direct and some qualifying indirect activities.”


Source: Tax Journal /KPMG