CIRD82100 – R&D tax reliefs: categories of qualifying expenditure

HMRC has published an updated version of its guidance under CIRD82100, which outlines the categories of qualifying R&D expenditure eligible for UK R&D tax relief. While the underlying rules of the guidance remain the same, it offers a clearer overview for businesses navigating what can and cannot be included in an R&D claim.

To qualify for R&D tax credits, companies must incur eligible costs in specific categories. When the SME scheme was first introduced, these categories were limited to staffing costs, consumable stores, and subcontracted R&D. Over time, however, more categories were added as the incentive evolved to cover a broader range of R&D activities and costs.

With the introduction of the large company scheme (CIRD85000), HMRC added contributions to independent research (CIRD82200), but this is only available to large companies. The rules for subcontracted R&D were also tightened for large companies, making this type of cost more restricted compared to the SME scheme.

In 2003, HMRC expanded the scope again to include externally provided workers (EPWs). This became eligible for large companies from April 2003 and for SMEs from September 2003 (CIRD84000).

A significant change came in 2004, when HMRC replaced the consumable stores category with two new ones: software costs (CIRD82500) and consumable or transformable materials (CIRD82300). The new consumables category was slightly broader, so anything that qualified under the old rules would still be covered. However, these categories were not applied retrospectively.

Further refinement followed in 2006 with the introduction of clinical trial volunteer costs. These became qualifying expenditure from April 2006 for large companies, and from August 2008 for SMEs (CIRD84400).

In more recent years, HMRC introduced new rules around data licences and cloud computing services, which have been qualifying costs for accounting periods starting on or after 1 April 2023, provided they contribute directly to resolving scientific or technological uncertainty. These costs sit alongside more traditional categories, reflecting the growing use of digital tools in modern R&D.

It’s also important to understand the payment requirement that applies to certain categories. For a claim to be valid, the company must have actually paid for the qualifying costs before submitting the R&D tax relief claim. This affects costs such as staffing, EPWs, subcontracted R&D (under the SME scheme), clinical trial volunteers, contributions to independent research, software, data, cloud computing services, and consumable or transformable materials.

A brief note on ITEPA 2003: changes to employment income legislation inadvertently affected the definition of staffing costs. HMRC addressed this issue by restoring the previous interpretation for any costs incurred from 1^ST April 2004 onwards (CIRD83200).

The latest version of HMRC’s CIRD82100 guidance makes no changes to the categories of qualifying expenditure for R&D tax relief. They remain staffing costs, consumable or transformable materials, subcontracted R&D, clinical trial volunteers, externally provided workers, software, data licences, cloud computing services (from 1 April 2023) and contributions to independent research.

Overall, this updated guidance offers a clearer and more accessible explanation of the qualifying expenditure categories for UK R&D tax relief. By maintaining the existing rules while clarifying key points like the payment requirements, HMRC aims to help businesses better understand what costs they can include in their claims. As R&D practices and technologies continue to develop, staying up to date with official guidance like CIRD82100 will remain essential for companies looking to maximise their tax relief opportunities.

If you’re unsure whether your R&D activities and associated costs fall within HMRC’s defined categories, TBAT Innovation is here to help. Our expert team works closely with businesses across all sectors to identify and categorise qualifying R&D expenditure in line with the latest HMRC guidance, including updates under CIRD82100. From traditional categories like staffing and consumables to newer areas such as software, data, and cloud computing, our team can review your R&D activities and spending to build an accurate, compliant, and fully optimised claim. Get in touch today to discuss your project and explore how we can help your business.