A development project's cost and its qualifying R&D cost are rarely the same number, and the gap is usually apportionment rather than exclusion. Most of the money is staff time, most of that staff time was spent on the project, and only part of the project was the resolution of a technological uncertainty. That last narrowing is where claims are won and lost.
Staff time is the whole game
For most claimants the dominant cost is people, and the claim is a percentage of their employment cost: gross pay, employer national insurance, employer pension contributions. Benefits in kind are excluded. The percentage is the proportion of their time spent directly on qualifying R&D, which means the claim rests on a record of what people worked on. A company with project time recording has a defensible claim; a company estimating a year later has a claim it will find hard to support on enquiry.
Where the project stops being R&D
The qualifying period runs from the point where work begins to resolve the scientific or technological uncertainty to the point where that uncertainty is resolved or the work is abandoned. Everything before, the commercial idea and the specification, is outside it, and everything after, the productionising, testing against requirements, documentation and launch, is outside it too. On a typical twelve-month development that can leave four or five months as the qualifying window, which is the single biggest reason a first-time claim comes in above what the evidence supports.
The other categories, and what they add
Consumables physically used up in the work, including a reasonable proportion of power, fuel and water for the qualifying period. Software licences used in the R&D, apportioned the same way. Data and cloud computing costs. Externally provided workers, at a restricted percentage of what the staff provider charged. Subcontractor payments, similarly restricted and subject to the rules on who is entitled to claim. Together these are usually a minority of a claim and occasionally, for hardware or process work, most of it.
Questions people ask about r&d costs
What R&D costs can a company claim?
Employment costs of people directly working on the R&D, apportioned by time, plus consumables, software, data and cloud costs, externally provided workers and subcontractor payments, each within its own rules.
Does the whole project count?
No. Only the period from the start of work to resolve the technological uncertainty to the point it is resolved or abandoned. Specification beforehand and productionising afterwards are outside it.
Are employer pension contributions claimable?
Employment costs include gross pay, employer national insurance and employer pension contributions, apportioned to the qualifying time. Benefits in kind are excluded.