If you’re planning to take advantage of R&D tax relief don’t forget to include qualifying indirect activities. 

HMRC allows businesses to claim for these supporting activities, but many miss out because they’re unsure exactly what can be included. Therefore, understanding exactly what sits in the scope of these activities is crucial in order to maximise your tax relief while staying compliant with the rules HMRC has set out.

As R&D tax credit consultants, we have extensive experience in guiding our clients through the ins and outs of what can and cannot be included in a claim. In this simple but comprehensive guide, our tax experts will walk you through what these indirect activities are and how to go about making the most of this valuable tax relief. 

What are qualifying indirect activities?

While it’s more generally understood what qualifies as direct R&D activities, there’s also plenty of work that goes into supporting your R&D projects. While this might not be strictly classified as research and development, it often takes up significant time and money and is essential to the success of innovations.

HMRC recognises that successful R&D requires more than just direct experimental work. The supporting activities that create the right environment for innovation and ensure proper documentation of results are equally important for claim purposes – but only if they’re specifically undertaken to support your R&D work.

Understanding indirect vs direct activities

There’s a careful line to tread when it comes to making the most of your claim and ensuring you don’t overstep, risking an HMRC compliance check. That’s why you need to clearly understand the distinction between direct and indirect activities in R&D. 

  • Direct activities, which we often refer to as core activities, are those that directly contribute to resolving scientific or technological uncertainties. This typically involves hands-on experimental work aimed at advancing knowledge and innovation.
  • Indirect activities support this core work but aren’t directly involved in resolving the uncertainties. We’ll tackle the specifics of what this entails next.

What has HMRC designated as qualifying?

Fortunately, HMRC has clear guidance on which indirect activities qualify for R&D tax relief. Let’s break down these officially designated categories so that you can check whether your business qualifies for any of them.

1. Scientific and technical information services 

Recording and analysing the findings from your R&D work is a key part of the process. This includes writing detailed reports and documenting what your research has uncovered. While this isn’t the hands-on experimental work itself, it’s essential for keeping track of your discoveries and progress.

2. Essential support activities 

Some behind-the-scenes work can qualify when it’s specifically needed for your R&D. Think specialist cleaning of research areas, maintaining R&D equipment, and administrative support that’s directly connected to R&D projects. Just remember – regular business tasks that would happen anyway don’t count.

3. Training and staff development 

When your team needs to learn specific skills to support an R&D project, this training can qualify. Like other aspects of R&D tax credits, you’ll need to document this in your Additional Information Form (AIF) to support your claim.

This might be learning how to use new research methods or specialist equipment – but not general professional development or standard training programmes.

4. University research 

Working with universities can be a valuable part of R&D. This collaboration often qualifies as an indirect activity. If students or academic researchers are contributing to your R&D projects, their work could be included in your claim.

5. Testing methods and development 

Creating new ways to test or measure your R&D work can qualify too. This includes developing new methods for assessing research results or validating your innovations – important work that supports your core R&D activities.

6. Feasibility studies and planning

Early studies that help shape the direction of your R&D work can qualify too. These studies help you work out if a research direction is viable and make smart decisions about where to focus your R&D efforts.

How to document indirect activities effectively

It’s vital that you keep detailed records of your qualifying indirect activities, in just the same way that you would for your core activities. The more detail you can give at every stage of your innovation funnel, the more likely you are to have your claim approved. In this context, documenting the process will mean having:

  • Clear records showing how supporting activities connect to specific R&D projects
  • Evidence that demonstrates why each indirect activity was needed
  • Accurate records of time spent by support staff
  • Clear financial records specifically for these activities

Common pitfalls to avoid

We’ve got a long history of helping businesses navigate the R&D claims process, from investigating their claim eligibility through to submitting the claim on their behalf and handling any follow-up enquiries. We’ve helped countless clients achieve 100% success with their submitted claims and along the way we’ve learned what typically prevents businesses from achieving this.

Including routine business work

One of the most common mistakes we see is including regular business operations that would have occurred regardless of R&D activity. 

Remember, indirect activities must be specifically tied to supporting your R&D work. It might be tempting to include everything that seems connected to your R&D, but that’s not how it works. 

For example, your regular IT support or general office cleaning won’t qualify, even if they benefit your R&D team. The key is to identify activities that you’re only doing because of your R&D work.

Insufficient documentation 

We’ve found that without clear evidence linking indirect activities to specific R&D projects, HMRC may question their inclusion in your claim. It’s crucial to maintain comprehensive records that demonstrate the necessity of these activities for your R&D work.

This is particularly important since the introduction of the R&D claim notification process, which requires more detailed upfront information about your R&D activities.

Missing eligible activities 

Don’t be put off from listing all of the eligible activities your businesses performed, both in direct and qualifying indirect activities. If you’re unsure about what qualifies, our R&D specialists will be happy to have an exploratory conversation to get a full understanding of your business and plan to claim.

We help businesses get the most from their R&D

The R&D tax credit scheme exists for a reason: to ensure that companies with legitimate innovations can be assisted for their efforts. Our experienced team is here if you want to explore how you could access this valuable tax relief or improve your existing claims, like by including indirect activities.

With established offices in Manchester and Liverpool, Williamson & Croft provides comprehensive R&D tax support across the North West and nationally. So wherever you’re based we’ll be able to support your business.

To start the conversation, contact the team at 0161 399 0121 or via info@williamsoncroft.co.uk.