What HMRC Accepts
Consumables are covered by section 1125 of the Corporation Tax Act 2009 and the CIRD manual at CIRD82000. The category covers items that are directly used, consumed, or transformed in the R&D process. The items must have been used up in the R&D activity, not merely stored, managed, or resold.
Typical qualifying consumables include:
- Raw materials transformed into prototypes or test articles.
- Chemical reagents used in laboratory research.
- Electricity powering R&D equipment and test rigs.
- Water used in experimental processes.
- Gases used in testing and research.
- Fuel for R&D equipment or prototype vehicles during testing.
- Specialist consumable parts used in destructive testing.
Apportionment
Three apportionment challenges recur in consumables claims.
Utilities. Electricity, water, and fuel are rarely separately metered for R&D activity. Apportionment typically uses floor area, equipment load calculations, or metered subsections of the bill. A specialist adviser will apply a defensible method.
Shared inventory. Where R&D and production draw from the same stock, bill-of-materials records, work orders, and pick lists provide the evidence. The claim covers only the portion consumed in qualifying R&D activity.
Mixed-use equipment. A test rig used 60% for R&D experiments and 40% for production quality checks allocates its consumables in the same proportion.
What Is Included
- Raw materials consumed in prototype manufacturing where the prototype is not sold or retained as a capital asset.
- Chemicals and reagents used in R&D laboratory activity.
- Apportioned electricity, gas, water, and fuel directly consumed in the R&D process.
- Consumable components destroyed in testing.
- Gases and specialist fluids used in experiments.
- Packaging materials consumed in test processes (not customer-facing packaging).
What Is NOT Included
- Capital equipment and machinery (covered by Research and Development Allowances separately, not by R&D tax credits).
- Items retained in a saleable product, including the first saleable unit produced at the end of a development programme.
- Materials used in routine production once the R&D has ended.
- Inventory held at year-end but not yet consumed.
- General office consumables (stationery, printer paper, cleaning supplies).
- Utilities attributable to office and commercial space.
- Materials consumed in training, demonstration, or marketing activity.
The Saleable Output Rule
The saleable output rule means a distinction has to be made between prototypes built purely for testing (which are scrapped or retained as non-saleable R&D assets) and prototypes that become saleable units. Materials in the first category are consumables; materials in the second are generally not.
For manufacturers developing new products, the rule affects how the final stages of the development run are treated. A specialist adviser will map the development stages against the saleable output rule and identify where the boundary falls.
Common Enquiry Risks
- Claiming consumables that end up in saleable output. The 2015 rule is frequently missed.
- Unsupported utility apportionment. A flat percentage without evidence is weak.
- Confusing capital with consumable. Equipment is not consumables, even if used in R&D.
- Including stock not yet consumed. Year-end inventory positions have to be tracked.
- Claiming office utilities as R&D consumables. Only the R&D-attributable portion qualifies.
- Counting materials used in training or marketing demos. Outside the R&D rules.
Worked Example (Indicative)
An engineering company runs a development programme for a new valve assembly in the year to 31 March 2026. Material costs consumed in prototype manufacturing and destructive testing total £86,000. None of the prototype output is sold; units are tested, analysed, and scrapped. Electricity directly powering test rigs, metered via a dedicated sub-meter, costs £12,400 for the year.
Claimable consumables cost: £86,000 + £12,400 = £98,400.
At the 20% merged scheme credit rate, this contributes £19,680 gross credit; net benefit approximately £14,760 after corporation tax at 25%. Figures are indicative.
Utilities: Metering, Apportionment, and Evidence
Utility cost apportionment is one of the weakest areas in many consumables claims. Three approaches work well, in descending order of evidential strength.
Sub-metering. A dedicated meter on the R&D area or equipment measures actual consumption. Monthly readings feed directly into the claim. This is the strongest evidence and the approach HMRC prefers for substantial utility claims.
Equipment load calculation. Where sub-metering is not practical, the power draw of R&D equipment multiplied by hours of use gives a calculated consumption figure. Supporting evidence: equipment specifications, hour logs, and the calculation methodology.
Floor area apportionment. The share of the facility footprint occupied by R&D activity is applied to the total utility bill. Weakest evidentially but sometimes the only practical method. Works best where the R&D area is clearly delineated and the activities in it are consistent.
Whichever method is used, the apportionment should be documented, consistent across years, and backed by underlying evidence.
Sector Examples of Qualifying Consumables
Chemicals and materials science. Reagents, solvents, catalysts, specialist polymers, raw metals for experimental alloys. Typically a high-value consumables claim, often 10-25% of the overall claim.
Food and beverage R&D. Ingredients used in recipe development and reformulation trials, where the output is scrapped or used only for tasting panels. Packaging consumed in shelf-life trials. Share of the claim varies but can be substantial.
Engineering and mechanical. Raw metals, fasteners, seals, and specialist components going into prototypes that are destructively tested. Gases used in machining and testing. Share 5-15%.
Electronics and hardware. PCBs, components, and modules consumed in prototype builds and failure testing. Share 5-12%.
Life sciences. Reagents, cell culture media, laboratory plasticware, assay kits. Share 10-25% depending on wet-lab intensity.
Inventory Discipline for Consumables Claims
A claim-friendly approach to consumables relies on good inventory and purchasing records. Four practical moves:
- Tag R&D purchases in the purchase order system at the point of requisition. Separate R&D cost centre codes flow through to the general ledger.
- Record consumption via work orders or lab logs, especially for high-value materials.
- Track year-end inventory and adjust the claim for items purchased but not consumed.
- Keep supplier invoices filed against R&D projects so the consumption history is reconstructible.
Documentation for Consumables Claims
- Purchase records for materials and utilities attributable to R&D use.
- Consumption records (work orders, lab logs, project-specific bills of materials).
- Apportionment schedules showing the calculation for utilities and shared inventory.
- Year-end inventory position confirming that claimed items were consumed in the period.
- Scrappage or disposal records for prototype output to demonstrate non-saleable treatment.
Saleable Output: Case Studies
The section 1126A saleable-output rule catches practitioners regularly. Three illustrative case studies.
Case study 1: fermented food product. A food company develops a new fermented product. Generations 1 to 6 are tested, tasted, and discarded. Generation 7 is the formulation that passes QA and becomes the first commercial batch. Materials in generations 1 to 6 are claimable consumables. Materials in generation 7 are not, because they end up in saleable output.
Case study 2: specialist chemical. A chemicals company develops a new catalyst. Experimental batches are tested, results logged, and the material disposed of as waste. None of the output is sold; the catalyst is later manufactured in new production runs. All the experimental batch materials are claimable consumables.
Case study 3: engineering component. An engineering firm develops a new fastener design. Generations 1 to 8 are destructively tested. Generation 9 is retained for long-term fatigue testing but not sold. Generation 10 is the first production run, sold to a launch customer. Generations 1 to 9 materials are claimable; generation 10 materials are not.
The critical question in each case is where in the development programme the output becomes saleable, and the materials in and after that point fall outside the consumables category.
Power for R&D Servers and Compute Infrastructure
Electricity powering on-premise R&D servers and compute infrastructure is a specific consumable cost that has become increasingly material for machine-learning and simulation-heavy R&D. The apportionment requires evidence of the R&D share of server usage.
For on-premise GPU farms used almost entirely for R&D model training, the apportionment is high. For shared infrastructure also supporting production workloads, the split follows the workload analysis. Where the server room is separately metered, the metered consumption directly supports the claim.
Note that for cloud infrastructure used in R&D, the cost is claimed under the data and cloud category rather than consumables. The power consumables route is for on-premise infrastructure.
Specialist Gases, Solvents, and Reagents
High-value specialist consumables frequently feature in chemistry, biology, and materials science claims. Typical examples:
- High-purity gases (helium, hydrogen, specialist inert gases) used in chromatography or experimental conditions.
- Deuterated solvents for NMR spectroscopy.
- Specialist catalysts and reagents.
- Cell culture media and specialised reagents in biology research.
These items are typically wholly consumed in the R&D process, supporting a near-100% apportionment. Evidence is usually straightforward: purchase records show the items bought, lab logs show their use, and the items are not stockpiled.
Handling Inventory That Serves Both R&D and Production
Where the R&D and production functions share inventory, a defensible apportionment approach is needed. Three options:
- Separate stock codes. R&D requisitions draw from a dedicated stock code or sub-location. Purchase records and consumption records feed directly into the claim.
- Work-order tagging. Each work order is tagged as R&D or production at the point of issue. Material consumption on R&D work orders aggregates to the claim figure.
- Calculated allocation. Where neither of the above is practical, a calculated allocation (based on output volumes, production hours, or team headcount) is used. Weakest of the three approaches but sometimes the only viable method.
The stronger the underlying tracking, the more robust the consumables claim.
Waste Disposal and Environmental Compliance Costs
Waste disposal costs directly associated with R&D consumables are part of the R&D cost and are claimable. Where chemicals, reagents, or test articles have to be disposed of under hazardous-waste rules following R&D use, the disposal fees follow the same treatment as the consumables themselves.
This can be a meaningful share of cost in chemistry and life sciences R&D, where specialist hazardous-waste contractors charge material fees. The claim treatment requires the disposal to be linked to R&D consumables (via waste consignment notes or similar evidence) and apportioned if the same disposal contract covers both R&D and production waste.
Environmental compliance costs that are not directly linked to specific R&D consumables (for example, general site environmental monitoring) are typically outside the rules.
Fuel for R&D Vehicles and Mobile Testing
Where R&D involves testing vehicles, mobile equipment, or field deployments, fuel consumed in the R&D activity is a consumable. Typical examples include prototype vehicle road testing, agricultural machinery field trials, and mobile environmental monitoring equipment.
Apportionment is based on R&D mileage versus total mileage, or R&D hours versus total operating hours. Fuel card data, mileage logs, and operator records support the split.
Laboratory Power and Environmental Services
A laboratory consumes significant power for environmental control (temperature, humidity, ventilation), specialist equipment operation (centrifuges, freezers, fume cupboards), and lighting. The R&D share of the lab's power consumption is claimable.
For a lab that is exclusively used for R&D, the apportionment is 100%. For a lab shared between R&D and routine QA or production, the apportionment reflects the share of R&D use, typically via bookable time slots, activity logs, or a floor-area sub-analysis.
Specialist Gas Cylinder and Delivery Costs
Specialist gases used in R&D typically come with associated cylinder rental and delivery fees. These ancillary costs are part of the consumable cost for R&D tax credit purposes and follow the same apportionment as the gas itself.
Supplier invoices routinely separate gas cost from cylinder rental; both lines go into the claim where the underlying use is R&D.
Related Cost Categories
- Prototypes — for the wider prototype cost treatment.
- Staffing costs — staff time associated with consumable use.
- Eligible Expenses pillar guide.