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HMRC internal manual

Corporate Intangibles Research and Development Manual

HM Revenue & Customs
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R&D tax relief: examining a claim: expense records

The following is a list of the type of records that HMRC may consider useful in enquiring into expenditure featuring in a claim. However we would not expect reference to the underlying records to be an automatic feature of an enquiry. If reference to the prime expense records is necessary it may be appropriate to confine checks to representative samples where the records are extensive.

Contributions to independent research (large companies only) CIRD82200 

  • Copies of notes of meetings or correspondence relating to the research and why it is considered to be relevant to the trade.
  • Copies of any agreements or contracts relating to the contribution.
  • Evidence the contributions were paid, such as bank records.

Software CIRD82500 

  • Receipts or contracts for software purchased, licensed or commissioned.
  • A copy of product/marketing literature for the software if it is necessary to demonstrate what it is used for.
  • Any evidence - e.g. internal cost accounting codes - showing it was properly charged to the R&D activity.

Staffing costs CIRD83000 

  • PAYE records.
  • Records of pension payments.
  • List of R&D staff.
  • R&D staff’s timesheets (for those not full time on the project).
  • Contracts of employment for R&D staff.

Externally provided workers CIRD84000 

  • Documentary evidence of the contract or arrangement with the staff provider.
  • Copy of invoices received.
  • Evidence of payments - e.g. bank records.
  • Details of the activities carried out and any evidence of active supervision by the company.

Subcontract costs CIRD84200 

  • Invoices from subcontractors.
  • Evidence of the nature of the work subcontracted and the terms applicable. We would generally expect there to be a written contract or evidence of the terms of the agreement.
  • Evidence of payments - e.g. bank records.

The lists above are indicative not mandatory, but they may be helpful in deciding what evidence there is and what it may be helpful to review in order to consider particular points. Where the expenditure is to a connected party, it would be helpful if any information supplied identifies this so that the subcontracting limits, or possible transfer pricing queries (CIRD82150) can be considered promptly.