Definition
The BIS guidelines set out seven categories of qualifying indirect activity. These are: maintenance of R&D equipment, administration directly related to R&D projects, ancillary activities (for example, disposing of waste from R&D), training undertaken to carry out R&D, research carried out to correct problems encountered in direct R&D, and activities involved in commissioning new R&D equipment. A seventh catch-all covers activities that are indirectly but genuinely necessary for the conduct of R&D and whose purpose would not exist if the R&D were not being carried out.
The key test in each case is purpose: the activity must be undertaken for the purposes of the R&D project. General business support that happens to touch an R&D project does not qualify.
How QIAs apply to an R&D claim
Staff costs are the most frequently claimed QIA cost. Where an employee spends part of their working time on tasks that fall within a QIA category, that proportion of their salary and associated costs can be included in the claim. The same time apportionment principles that apply to direct R&D staff apply here: the claim must be based on a reasonable estimate of the time actually spent, supported by records that would satisfy an HMRC enquiry.
Consumables and certain overheads attached to QIA activities may also qualify, provided the direct link to the R&D project can be demonstrated. However, the cost categories available for indirect activities follow the same rules as those for direct R&D: software that serves only general administration, for instance, would not qualify even if used by an R&D team.
Example
A medical devices company runs a two-year project to develop a new diagnostic sensor. The project team includes a full-time research scientist (direct R&D) and a part-time project administrator who books specialist lab facilities, files regulatory paperwork for the clinical testing phase, and co-ordinates equipment servicing. The administrator spends 40% of their time on these tasks. That 40% of salary and associated employer NIC qualifies as a QIA staff cost. The remaining 60%, spent on general company administration unrelated to the project, does not qualify.
Common mistakes
The most frequent error is including general administrative overhead as if it were project-specific. A finance director reviewing R&D budgets once a quarter is not performing a qualifying indirect activity: there is no administrative task whose sole purpose is to support the R&D project. A second error is claiming training that is not directly targeted at enabling R&D activity, such as general management development courses for team leaders who happen to oversee an R&D department.
A third mistake is failing to document QIA time separately from direct R&D time. When HMRC opens a compliance check, the two categories will be examined independently, and an undifferentiated time record that lumps QIA and direct work together may cause both to be disallowed.
See the qualifying expenditure guide for a fuller treatment of which cost categories can be included in a claim, and use the eligibility checker to test whether your staffing mix supports a claim.
Related terms
Frequently asked questions
What are qualifying indirect activities in R&D tax relief?
Qualifying indirect activities (QIAs) are supporting tasks carried out for the purposes of an R&D project that qualify for R&D tax relief even though they do not themselves advance science or technology. They are defined in the BIS guidelines and include administration directly related to R&D, training to carry out R&D, and recruitment of staff to carry out R&D.
Can admin staff costs be included in an R&D claim through QIAs?
Yes, but only if the admin work is directly related to R&D activity. General company administration does not qualify. A project manager spending time co-ordinating R&D activities could have a portion of their costs included, whereas the same person running payroll cannot.
How do QIAs differ from direct R&D activities?
Direct R&D activities are those that attempt to resolve scientific or technological uncertainty. QIAs support direct R&D but do not themselves tackle the uncertainty. HMRC will scrutinise whether claimed indirect activities genuinely serve the R&D project or whether they are routine business support added to the claim.
Are there QIAs that HMRC excludes entirely?
Yes. The BIS guidelines list activities that are not qualifying indirect activities even if they touch the R&D project. These include general financial management, IT support for non-R&D systems, sales and marketing, and cleaning or security of general business premises. Only activities whose primary purpose is to support the R&D project will count.