Definition
For each employee included in a claim, the company must determine what fraction of their working time during the accounting period was spent on qualifying R&D activities. That fraction, expressed as a percentage, is applied to the employee's total qualifying costs (salary, employer NIC, and pension contributions up to a specified cap) to produce the amount included in the claim.
Where an employee worked exclusively on R&D throughout the period, the fraction is 100%. Where they split their time between R&D and other work, the fraction must reflect that split as accurately as possible. HMRC accepts reasonable estimates, but "reasonable" is tested by whether the company can point to records made at the time the work was done, not records reconstructed retrospectively for the purpose of a claim.
What records support a defensible apportionment
Timesheets are the most direct form of evidence, but they are not required. The First-tier Tribunal in Quinn (London) Limited v HMRC [2021] UKFTT 437 (TC) accepted that project records, calendar entries, sprint logs, and manager testimony could collectively support a time split even in the absence of formal hour-by-hour timesheets. The company in that case recovered approximately £1 million in R&D tax credits, with the time apportionment methodology holding up under tribunal scrutiny.
Other records HMRC will find persuasive include: project management tool exports (Jira, Asana, GitHub commit logs), lab notebooks, meeting records tied to specific projects, and payroll records that show role descriptions consistent with R&D work. The more directly the records connect a named employee to a named R&D project on specific dates, the stronger the apportionment will be.
Example
A software company has three engineers. One works exclusively on a new algorithm (100% R&D). The second splits time between maintaining an existing product and developing a new API with genuine technical uncertainty (estimated 60% R&D based on sprint planning records). The third handles customer support and infrastructure, with no R&D involvement (0%). The company includes the first engineer's full costs, 60% of the second engineer's costs, and none of the third engineer's costs. In a compliance check, HMRC asks for evidence of the 60% split. The company provides sprint board exports and a manager's witness statement explaining the project boundaries. HMRC accepts the apportionment.
Common mistakes
Round-number apportionments attract scrutiny. If every technical employee in the company is claimed at exactly 50% or exactly 80%, HMRC will ask why those percentages are so uniform across people who presumably had different roles and different project involvement. A second error is including senior managers or directors at high percentages without evidence that their time was genuinely spent on qualifying R&D rather than on general business oversight.
A third mistake is applying the same percentage year after year without revisiting whether it still reflects actual working patterns. Projects change: an engineer who spent 80% of their time on qualifying R&D in year one may have spent only 30% in year two once the development phase moved into testing and deployment.
For a broader view of which costs qualify once the time fraction has been determined, see the qualifying expenditure guide and the qualifying indirect activities entry. Use the eligibility checker to test the rough value of your claim before speaking to a specialist.
Related terms
- Staff Costs (R&D)
- Time Apportionment
- Qualifying Indirect Activities
- Fraction of Time
- Compliance Check
Frequently asked questions
How should a company apportion staff time for an R&D claim?
HMRC requires a reasonable estimate of the time each employee actually spent on qualifying R&D activities. There is no mandated method, but the estimate must be supportable by records made at the time the work was carried out. Acceptable approaches include timesheets, project management logs, calendar entries, and narrative descriptions supported by payroll and HR records. Round-number estimates applied to every technical employee will attract scrutiny if they cannot be explained.
Does HMRC require timesheets?
No. HMRC guidance does not mandate timesheets. The First-tier Tribunal in Quinn (London) Limited v HMRC [2021] UKFTT 437 (TC) accepted that project records, calendars, and manager testimony can support a time split even without formal timesheets. The requirement is for a reasonable, defensible estimate, not a specific format.
Can a director's time be included in an R&D claim?
Yes, if the director is directly involved in the R&D activity. Director salaries and associated employer NIC qualify on the same basis as other staff costs. The time apportionment methodology still applies: only the proportion of time spent on qualifying R&D activities can be claimed, and general management duties cannot be included.
What happens if HMRC challenges the time apportionment?
HMRC may open a compliance check and request evidence to support the claimed time split. If the company cannot produce records that give a reasonable basis for the percentages claimed, HMRC may reduce the claim or disallow it. Having project logs, sprint records, lab notebooks, or contemporaneous emails that demonstrate the scope and timeline of the R&D work strengthens the company's position considerably.