Definition
Staff costs, as a qualifying R&D expenditure category, are the costs of employing staff who are directly or indirectly engaged in qualifying research and development. Eligible cost elements include gross salary, employer National Insurance contributions, employer pension contributions, and specific reimbursed expenses such as travel to third-party R&D sites. Benefits in kind, dividends, and payments to directors who are not employees are excluded. Staff costs are the largest qualifying category for most claimants.
How HMRC defines it
HMRC guidance on staff costs is at CIRD83000 onwards of the CIRD Manual. The legislation is at sections 1123 and 1124 of the Corporation Tax Act 2009. HMRC's Reimbursed Expenses Guidance, published in 2016 and updated since, sets out the specific rules on which employer-reimbursed expenses qualify.
Practical example
An R&D engineer on a £80,000 gross salary, with £10,500 employer NIC and £4,800 employer pension, spends 75% of her time on qualifying R&D. The total relevant staff cost is £95,300 and the qualifying staff cost is £71,475. Add any qualifying reimbursed expenses apportioned to the R&D work on the same basis.