R&D claims: how to apportion my employee’s time

Often we find that clients are unsure exactly how to claim the time staff spent on an R&D project. Due to the way businesses run, it is not always easy to pull apart a job roll and quantify where time is spent. 

However, it can, and should, be done. 

Staff costs are considered as a qualifying expenditure for R&D tax credits. Both directors and employees who are directly engaged in the relevant R&D projects will be classed as ‘qualifying’, but you will need to proportion how much of that employee’s time is spent on the actual project.

Preferably, when trying to assess how much of an employee’s time was spent actively engaged in R&D projects, you want some evidence to back this up. This can cause a snag if there are no records kept of how staff time has been spent, particularly if you became aware of R&D tax credits after the fact. 

HMRC are aware that there may be no detailed record keeping in this area, and will accept your personal judgements as long as they are reasonable and supported by some evidence. 

You may find it helpful to ask yourself:

  • What qualifying R&D projects did the employee work on during the year that you’re claiming for?
  • On each of the projects that you’re claiming R&D tax credits for, what qualifying R&D activities did the employee carry out?
  • What proportion of the employee’s total time did these activities take? This can be measured in hours or days, and used as a percentage of their total time working across the year.

For future claims, HMRC may be less lenient. If you’re looking to claim for work yet to be carried out, it may be worth heading back to something as straight-forward as a timesheet or a fancy of time tracking software. It doesn’t need to be fancy, but it will provide the evidence that you need.

If you are struggling to work out how to build a time keeping system into your business – be it a problem in identifying technology to help of getting staff to fill it in – then get in touch. We help businesses to plan and think forwards about their R&D, maximising the claim value and making the submission as robust as can be.

Get in touch by booking a quick call here.