What the category actually contains
HMRC’s manual defines the measure tightly. It is the emoluments paid by the company to its directors or employees: all salaries, wages, perquisites and profits whatsoever, other than benefits in kind. To that add the secondary Class 1 National Insurance the company pays, and the company’s contributions to a pension fund for those directors or employees.
Three practical consequences. Cash pay, including bonuses, is in. Benefits in kind, company cars, accommodation, vouchers, are out, however integral the person is to the project. And dividends are simply not emoluments, so a founder paid mostly in dividends contributes little to this category regardless of how much R&D they personally did.
Directly and actively engaged
The people whose costs count are those directly and actively engaged in the R&D: the engineers resolving the uncertainty, and those doing qualifying indirect activities that support it. Where someone is partly engaged, the manual is explicit that only that proportion of their staffing costs qualifies. HMRC’s own worked illustration is exact: a staff member spending 90% of their time on R&D supports a claim for 90% of their staffing cost.
The judgement is about activities, not job titles. A “Head of R&D” who spends the year managing commercial relationships is barely in the category; a production engineer seconded to resolve the uncertainty is squarely in it for that time.
Where staff claims go wrong
- Whole-company percentages. Applying one blended percentage to the entire payroll, including admin, sales and management, is the classic overstatement. The test runs person by person.
- The everyone-was-involved memory. Twelve months later, everybody remembers the exciting project. Contemporaneous records, timesheets, tickets, sprint logs, meeting notes, are what HMRC’s compliance guidelines expect you to be able to produce, and reconstructed estimates get a rougher ride.
- Claiming through the wrong entity. The measure is what the claimant company pays its directors and employees. Group recharges, personal service companies and people employed elsewhere in the group need the externally-provided-worker or contractor rules instead, covered on subcontractors and agency workers.
- Support work that would have happened anyway. Clerical and maintenance effort qualifies only insofar as it is undertaken for the R&D; general overheads dressed as project support are excluded by the guidance in terms.
If your apportionments would not survive a polite request for the evidence behind them, fix that before claiming, not after HMRC asks. What good records look like is on record-keeping.
Frequently asked questions
Can we claim 100% of our developers' salaries?
Only for people wholly engaged in qualifying R&D across the period, which is rarer than it sounds once meetings, support, maintenance and commercial work are counted honestly. For everyone else, an evidenced proportion is the claimable amount.
Do dividends to founder-directors qualify?
No. The measure is emoluments, employer National Insurance and employer pension contributions. Dividends are none of those, which is one reason founder-heavy companies paying themselves in dividends often have smaller claims than they expect.
Do bonuses count?
Yes, bonuses are within emoluments, apportioned like salary to the R&D engagement. Benefits in kind, by contrast, are excluded, as are redundancy payments.
What records satisfy HMRC on apportionment?
HMRC asks for evidence, not perfection: contemporaneous timesheets where they exist, otherwise project records, calendars and a reasoned, written method. What fails is a round percentage with nothing behind it.