The impact on R&D staffing costs for employees that have been furloughed

Claims by companies for research and development (R&D) tax relief both under the small and medium sized enterprises (SME) regime and under the R&D expenditure credit (RDEC) regime for larger businesses can only be made for qualifying costs. The most significant category of eligible costs is often staffing costs which qualify for relief if and to the extent that the relevant employee is directly and actively involved in qualifying activities (CTA 2009 s 1124). HMRC has recently updated its guidance to clarify its expectations as to how claimants should quantify qualifying staffing costs for employees who have been furloughed during the current global coronavirus pandemic (CIRD83200).

Furlough and qualifying activities

In order for the employer to claim support under the government’s coronavirus job retention scheme (CJRS) employees who are placed on furlough are not permitted to ‘work’ during any furlough period. The R&D...