UK R&D Tax Claims: How to Allocate Staff Time Accurately

For UK tech startups and scaleups, staff costs often make up the majority of an R&D claim. Developers, engineers, data scientists, product leads, and technically involved founders are at the heart of qualifying expenditure. How you apportion their time between R&D and non-R&D activities can make or break a claim.

Since the April 2024 reforms and the merged R&D scheme, HMRC’s focus has shifted: it’s less about whether you do R&D and more about how much of your staff costs actually qualify. With the Additional Information Form (AIF) now mandatory, clear, consistent, and evidence-backed apportionments are more important than ever.

This guide explains what “just and reasonable” apportionment means, how HMRC evaluates staff time, and how UK tech companies can create claims that stand up to scrutiny.

Why Apportionment Matters More Than Eligibility

Most companies can describe qualifying R&D. But HMRC quickly moves from the technical narrative to the numbers. Staff cost apportionment is the bridge between what you say you did and what you claim.

HMRC doesn’t usually question the science first—they start with the percentages assigned to staff time. If your apportionments aren’t credible, the claim is at risk. Read more here.

What Counts as “Staff Time” for R&D

Staff time means time spent directly on qualifying R&D, not presence, effort, or job importance.

Qualifying R&D includes:

• Designing/testing new architectures
• Developing novel algorithms
• Solving complex scalability or integration problems

Non-qualifying activities include:

• Routine build work or standard configuration
• Well-understood bug fixes
• General management or people management
• Commercial decision-making

Mixed roles are normal. A CTO might spend mornings on experiments and afternoons on planning. Apportionments should reflect reality, not flatten responsibilities.

Qualifying Indirect Activities (QIAs): Some supporting work counts if it exists solely because R&D is happening, e.g., technical planning or admin tied to experiments. Focus on direct R&D first, indirect only if clearly traceable.

Directors’ and Founders’ Time: High-Risk Area

Directors often wear multiple hats. Only technical contributions count. Robust apportionments usually relate to specific periods or activities, not flat percentages across the year.

The 100% myth: HMRC is skeptical of any 100% apportionments. Even in R&D-heavy businesses, staff spend time in meetings, training, or routine tasks. Credibility matters more than high percentages.

Evidence: What HMRC Really Wants

HMRC does not mandate timesheets or specific tools. They expect a just and reasonable methodology backed by evidence. Useful evidence includes:

• Jira/Linear tickets tagged as R&D
• Sprint plans and retrospectives
• Git commit histories
• Design documents and technical notes
• Internal discussions about technical challenges

Claims based purely on memory are much harder to defend.

Common Apportionment Approaches

• Pure engineers: Project-based apportionment using Jira tickets, Git logs, or other project tools.
• Product or hybrid roles: Role-based apportionment with weekly diaries, sprint retrospectives, or internal notes.
• Founders/CTOs: Activity-based apportionment using meeting minutes, design notes, and project documentation.

Consistency is key. The method must align with the technical narrative, cost mapping, and evidence base.

Small Changes, Big Impact

Apportionment has real financial consequences:

Example: Engineer earning £80,000/year

• 70% apportionment → £56,000 claim
• 40% apportionment → £32,000 claim

Across a team, these differences multiply. HMRC knows this, which is why scrutiny is high.

Where Claims Often Fall Down

• Inconsistency: Year-round percentages that don’t reflect actual experimentation periods.
• Overstated director time without evidence of technical contribution.
• Lack of supporting documentation across multiple evidence sources.

Building a Sustainable Approach

Strong claims are incremental and evidence-driven, not reconstructed at year-end. Best practices:

• Tag R&D work in project tools in real time
• Keep brief monthly notes of uncertainty
• Periodically review role-based splits
• Document directors’ technical contributions precisely

This approach reduces risk, saves time, and makes claims easier to defend.

Summary

Apportionment is the bridge between your R&D story and the tax numbers.

• Modest, consistent, well-evidenced percentages beat aggressive estimates.
• Mixed roles are fine; percentages must reflect reality.
• Evidence is not optional—HMRC expects a coherent methodology.

By approaching apportionment systematically throughout the year, claims become faster to prepare, easier to defend, and less stressful during review.

FAQ: Staff Apportionment

1. Can I claim 100% of a developer’s time?
   Rarely defensible; most staff have non-qualifying activities.
2. Does HMRC require time-tracking software?
   No, but you need a reasonable method backed by evidence (tickets, Git logs, sprint retros).
3. We’re agile—how do we track R&D?
   Tag experimental tickets in real time; use sprint backlogs and retrospectives.
4. Can indirect staff like HR/finance be included?
   Only if work is directly linked to a qualifying R&D project.
5. What if HMRC disagrees with my apportionment?
   Claims can be scaled back, and careless errors may incur penalties. Clear, documented rationale is crucial.
6. Do I submit evidence upfront?
   Submit your methodology in the AIF. Keep supporting documentation ready for any checks.