Definition
Apportionment, in the R&D tax relief context, is the allocation of costs or time between qualifying and non-qualifying categories. It applies where an employee splits time between R&D and non-R&D work, where consumable items are partly used in a qualifying project, or where an accounting period straddles a legislative change such as the 1 April 2024 move to the merged scheme. The apportionment method must be just and reasonable and supported by contemporaneous evidence.
How HMRC defines it
HMRC's position on apportionment is set out across CIRD83000 for staff costs, CIRD82300 for consumables and CIRD81160 in relation to straddling periods. HMRC accepts a range of methods including timesheets, project codes, reasonable estimates supported by diaries, and engineering-derived usage figures for consumables. The approach must be consistent year on year and the underlying evidence must be retained.
Practical example
An engineer spends an estimated 60% of a given year on a qualifying R&D project and 40% on routine production support. With contemporaneous timesheet evidence, the staff cost apportioned to the R&D claim is 60% of the relevant salary, employer National Insurance and pension contribution. The remaining 40% is outside the claim.