Using a company debit or credit card for employee travel expenses disqualifies such expenditure from being allowable in an R&D tax credits claim.
By processing expenses such as travel, airfare, subsistence, and hotel costs, as reimbursements, you’re able to include them in support of R&D claims. According to the HMRC, for certain costs to be included in an R&D tax claim, they must have been first paid directly by the employee and then later reimbursed by the company. These costs could potentially increase your claim amount by thousands of pounds.
In order to include these expenses in your R&D tax credits claim, you need an established process for categorising fees related to attending meetings, travelling to and from different locations, meals, subsistence, taxi fare, and other travel-related costs.
According to HMRC, employees must have paid an expense out of pocket and then later received reimbursement by the company for the expense to be included in an R&D tax credit claim
Maximise Research and Development Tax Credits
Here are a few things you can do to maximise your R&D tax credits claim by implementing an expense policy for your employees:
1. Create an Expense Policy
By implementing an expense reimbursement policy with R&D tax credits in mind, businesses can easily categorise qualifying expense. Having this policy in place will help organise the necessary documents to support an R&D claim in a more efficient manner.
Make sure all payments are initially paid by the employee, out of their personal bank account or personal credit card, and then later reimbursed by the company.
RDvault easily integrates with the above online accounting applications to help you build your R&D tax credits claim quickly and easily factoring travel and subsistence expenses into account.
2. Outline a Detailed Description of Qualified Reimbursable Expenses
Ensuring that your employees know exactly what expenses can be reimbursed will keep your accounting records accurate and organized. Which means you’ll never miss an expense in your R&D claim!
You will need to review each employee request for reimbursement to ensure they are categorized correctly and that they do qualify for an R&D tax credit claim.
Detailing the description of expenses allowed for reimbursement shows your strict compliance with the HMRC guidelines regarding staffing costs, (HMRC Manual CIRD83200) regarding qualifying reimbursable expenses.
Making an R&D Tax Credits Claim
When you make the R&D tax credit claim, you will need to internally organise all of your documents, including reimbursed expenses, to support your credit amount.
It’s an important distinction that an employee is reimbursed for expenses in order for these expenses to qualify under an R&D claim.
Expenditures paid directly by the company through a company credit card or direct business bank transfer cannot be classified as staffing expenses for R&D tax credits purposes. They will only be considered staffing expenses eligible for consideration in a research and development tax claim if they meet the HMRC guidelines.
According to HMRC guidelines:
- The expense constitutes an expense to the company of employing staff, and
- The expense is an expense the employee pays in order to fulfil the requirements of her employment.
An Example: R&D Qualifying Travel Expenses
Thomas needs to travel frequently between London and Los Angeles, at least three times per year to meet with their R&D team.
His hotel is booked through the company credit card– £1,500
This is not a qualifying expense for R&D tax credits purposes. If he had paid with a personal credit card and was later reimbursed by the company, the expense would be counted toward an R&D tax credit claim.
Thomas takes ta[is to meet with the team while he’s there– £180
This is an R&D qualifying expense as he paid out of pocket and was reimbursed by the company upon return.
While in Los Angeles, Thomas hires a meeting room– £200
This is not a qualifying expense as the use of the meeting room is not relative to the cost of employing staff, and it’s not related to the employee’s travels.
The total potential amount that could be considered in an R&D tax claim is £1,680
Since Thomas did not pay for certain expenses out of pocket first with later reimbursement from the company, those amounts will not qualify.
Had Thomas paid for the hotel with a personal credit card initially and filed for reimbursement with the company, the total amount could have been included as a qualifying expense related to research and development.
RDvault Software Streamlines the Process
By using RDvault’s proprietary R&D tax credits software, you can sync your expenses directly from your accounting software.
We offer a simple questionnaire to build the narrative necessary to file your claim, and our software syncs with live financial data to produce a ready-to-file claim to HMRC.
If you’d like more information about R&D qualifying expenses or have questions about setting up a policy to accurately account for qualifying expenses, get in touch with RDVault.