Qualifying indirect activities are the supporting tasks that form part of an R&D project without themselves resolving the scientific or technological uncertainty: maintaining the equipment, keeping the records, recruiting onto the team. The Guidelines that define R&D for tax purposes treat them as R&D. Paragraph 5 says it in terms: certain qualifying indirect activities related to the project are also R&D. Staff time spent on them can therefore enter a claim, apportioned, alongside the technical work.
The paragraph 31 list
Paragraph 31 defines them as activities which form part of a project but do not directly contribute to the resolution of the scientific or technological uncertainty. They are:
- 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)
- indirect supporting activities such as maintenance, security, administration and clerical activities, and finance and personnel activities, insofar as undertaken for R&D
- 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)
- training required to directly support an R&D project
- research by students and researchers carried out at universities
- 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
- feasibility studies to inform the strategic direction of a specific R&D activity
Paragraph 32 shuts the door behind it: activities not described in paragraph 31 are not qualifying indirect activities. HMRC’s manual calls it “the exhaustive list at Para. 31”. There is no residual category for supporting work that felt essential but is not on it.
Two conditions carry most of the weight
The first is that the activity has to form part of a project seeking an advance in science or technology. HMRC’s manual is direct: for every category, “only such activity that is specifically identifiable as a particular part of the activity of an R&D project can qualify. The costs of other supporting activities undertaken by the company outside the R&D project itself are therefore not included.”
Its own example makes the boundary concrete. A maintenance engineer’s time repairing equipment used specifically and solely for the R&D project can qualify. Time spent maintaining other equipment on the same site cannot, and nor can secretarial work in the company’s maintenance department, because it is not part of the project.
The second is that support of support does not count. Under s.1124(5) and (6) of the Corporation Tax Act 2009, people supplying services, such as secretarial or administrative services, in support of activities carried on by others are not, for that reason, treated as directly and actively engaged in those activities. A technical lead’s time interviewing to recruit a scientist onto the project can be a qualifying indirect activity; the corporate HR department’s support of that interviewing is not. Managing the project budget can qualify; the finance department preparing accounts or auditing project expenditure does not.
What this means for staff costs
HMRC’s costs guidance is plain: you can claim a proportion of the staff cost for anyone who carries out work to support the project but does not directly contribute towards the resolution. Its examples are human resources used to recruit a specific person to work on the project, and specialist cleaning staff.
The limits matter more than the permission. Where a staff member has other duties, only the time spent on the task that supported the R&D work can be claimed; HMRC says in terms that you cannot claim 100% of the staff cost. Clerical or maintenance work that would have been done anyway is excluded outright, with managing payroll as the example — which catches most of what companies instinctively want to add.
Whether someone is directly and actively engaged, and how far, is a question of fact based on the duties performed rather than the job title. So this time needs the same recorded apportionment basis as technical time, arguably a firmer one.
How much difference does it make?
Less than “you can claim your admin staff” suggests. Qualifying indirect activities widen a claim at the margins: a slice of a maintenance engineer, part of a technical lead’s recruitment and line-management time, the preparation of the original report of findings. Every hour added needs tracing to a specific project and evidencing like any other apportionment. Claims that add a flat percentage of the finance and HR functions are the ones that come apart under an HMRC check.
One piece of confusion is worth clearing: it is sometimes said that qualifying indirect activities are R&D but attract no relief. The Guidelines’ revised footnote records that the original footnotes saying exactly that were removed, because whether expenditure on them qualifies depends on a number of factors, “but there is no blanket exclusion”. One targeted exclusion does exist, and it is the exception that proves the point: data licence and cloud computing costs attributable to qualifying indirect activities cannot be claimed. Staffing, software, consumables and externally provided workers all can, and our page on which software and cloud costs qualify covers the carve-out in detail.
For which supporting staff belong in a claim, and at what proportion, talk it through with a chartered adviser. See also what counts as qualifying R&D and which costs qualify.
Sources
- Guidelines on the meaning of R&D for tax purposes — paragraph 5 (certain qualifying indirect activities related to the project are also R&D), paragraph 31 (the list), paragraph 32 (activities not described in paragraph 31 are not qualifying indirect activities), and the revised footnote on the removal of the original footnotes 2 and 3.
- Check what R&D costs you can claim — HMRC’s condensed list of qualifying indirect activities, the proportion of staff cost claimable for supporting staff, and the exclusion of clerical or maintenance work that would have been done anyway.
- CIRD133000: staffing costs under the reformed reliefs — the exhaustive list at paragraph 31, the requirement that the activity form part of an R&D project, the support-of-support restriction, and the maintenance engineer, HR and finance examples.
- CTA 2009 s.1124 — subsections (4), (5) and (6) on the appropriate proportion of staffing costs and on services provided in support of activities carried on by others.
This page describes the rules as they stood at the review date above, as general information rather than advice on your circumstances. For how that distinction works, see our terms; for an answer on your own facts, talk to us.