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Can directors’ dividends be included in R&D tax credit claims?

by Daniel Middleton

Money spent on directors’ dividends are not classed as qualifying expenditure for the purposes of research and development (R&D) tax credits. Therefore, you cannot include these in your claim.

From a personal taxation perspective, it is generally more efficient for directors to receive remuneration via dividends, rather than as a salary.

However, where directors are significantly involved in R&D activity, their dividends could have a substantial effect on the value of an R&D tax credit claim. This is because salary and employer pension contributions are qualifying expenditure for R&D tax credits, but dividends are not.

What costs qualify for R&D tax credits?

Staff costs that can be included in an R&D tax credit claim

The staff costs that can be included in an R&D tax credit claim include:

  • Salaries
  • Employer’s National Insurance contributions
  • Employer pension contributions, and
  • Some reimbursed business expenses.

 

At ForrestBrown, as well as helping innovative businesses grow using R&D tax credits, we also provide strategic advice from our highly qualified tax team, to help you maximise future claims. This is designed to help you achieve a culture of R&D.

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This article was last updated on 7 May 2019.

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