How do I allocate my employee’s time for R&D claims?

In your R&D claim, you need to provide a reasonable explanation for how much time your staff spent on qualifying R&D activities. Staff costs can relate to activities that directly contribute to the resolution of scientific or technological uncertainty, as well as qualifying indirect activities that support that work. This is because staff costs are a qualifying category of R&D expenditure.

One of the strongest ways to support this information is through timesheets. Businesses should be able to explain within their documentation how staff time was dedicated to qualifying research and development activities.

Staff costs are a qualifying category of R&D expenditure where employees have undertaken activities that directly contribute to resolving a scientific or technological uncertainty, or qualifying indirect activities that support that work.

One of the most reliable ways to evidence staff time is through records such as timesheets. Maintaining contemporaneous records will provide a clear audit trail and outline how time has been apportioned between qualifying and non-qualifying research and development activities.

In practice, many businesses make R&D tax claims retrospectively, which means they may not have maintained detailed records at the time the work was carried out. Where timesheets are not available, businesses should use a reasonable and evidence-based methodology to estimate the proportion of staff time spent on qualifying R&D activities.

Any estimates used should be consistent with the technical narrative, project records and the nature of the work undertaken. Businesses should be able to explain how those estimates were calculated if HMRC requests further information.