1. KnowledgeBank
  2. Qualifying expenditure
  3. Can directors’ dividends be included in R&D tax credit claims?

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

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.

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.

Have a question for our team?

It can be complicated to submit an R&D tax credit claim to HMRC’s exacting standards.

Get in touch with our team of chartered tax advisers, chartered accountants, lawyers, sector specialists, former HMRC inspectors and quality assurance experts to access expert guidance for your claims.

 

This article was last updated on