Can you include maternity costs in an R&D claim?

Staff costs are allowed when calculating an R & D claim. Does that include maternity costs?

Didn't find your answer?

Staff costs are allowed when calculating an R&D claim. Does that include maternity costs? Would you need to deduct the amount recovered if the costs are allowed?

Replies (27)

Please login or register to join the discussion.

avatar
By Bobbo
01st Mar 2024 11:16

What exactly are "maternity costs"? Do you mean salary (and nic pension etc) paid to a person whilst they are on maternity leave?

Exactly what percentage of their time does a person on maternity leave spend engaged in R&D?

Thanks (2)
Replying to Bobbo:
avatar
By JanetHewitt
01st Mar 2024 11:23

Maternity would be statutory maternity pay as dictated by HMRC and this may be topped up by the employer. It would attract NICs and pension
The person would normally work 100% of their time on R&D

Thanks (0)
Replying to JanetHewitt:
avatar
By Tax Dragon
01st Mar 2024 11:24

How do you interpret s1124 in this scenario?

Thanks (2)
Replying to Tax Dragon:
avatar
By FactChecker
01st Mar 2024 13:27

I'm assuming that "employee is partly engaged directly and actively in relevant research and development" excludes the period on Maternity Leave ...
... and so "The appropriate proportion of the staffing costs relating to the director or employee is treated as attributable to relevant research and development" means the staffing costs from any period prior to or after that ML *may* be attributed (subject of course to the nature of the work performed in those periods).

Thanks (2)
Replying to JanetHewitt:
RLI
By lionofludesch
01st Mar 2024 12:03

JanetHewitt wrote:

Maternity would be statutory maternity pay as dictated by HMRC and this may be topped up by the employer. It would attract NICs and pension
The person would normally work 100% of their time on R&D

You've not convinced me. I suspect you'll struggle to convince HMRC.

Thanks (2)
Replying to lionofludesch:
avatar
By Tax Dragon
01st Mar 2024 13:07

Sure, but it's not enough to go by gut feel with something like this - you must look up the definitions, and they are in the law.

Thanks (1)
Replying to JanetHewitt:
Stepurhan
By stepurhan
01st Mar 2024 12:09

JanetHewitt wrote:
The person would normally work 100% of their time on R&D

What they would normally do is irrelevant. The claim is for the costs involved in doing R & D work, which maternity pay clearly isn't.
Thanks (1)
Replying to stepurhan:
avatar
By paulwakefield1
01st Mar 2024 13:39

Whilst I agree with these arguments, sick pay and holiday pay is allowable. Is SMP so different?

Thanks (0)
Replying to paulwakefield1:
By Ruddles
01st Mar 2024 14:04

In my view there is a big difference. But if I were to state the thinking behind that view I'd no doubt be shot down in flames.

Thanks (2)
Replying to Ruddles:
avatar
By paulwakefield1
01st Mar 2024 14:17

I think you might well be. :-)

Thanks (1)
Replying to Ruddles:
avatar
By Tax Dragon
01st Mar 2024 14:17

I'll have a go. One difference is that sick pay and holiday pay are mentioned in CIRD83200; maternity pay isn't. HMRC see the first two as a necessary cost of the R&D work.

Thanks (2)
Replying to paulwakefield1:
avatar
By FactChecker
01st Mar 2024 14:14

Like Ruddles, I think I can see a difference but am not about to plonk my big feet in that puddle.

However, can you provide a reference for your statement regarding 'sick pay' being included within 'attributable employment costs' for an R&D claim?

I can understand it including 'holiday pay' - particularly after the recent changes to the regs - as this is in essence being paid (or at least accrued for later payment) for each hour of work performed.

Thanks (3)
Replying to FactChecker:
avatar
By Tax Dragon
01st Mar 2024 14:19

Sorry, hadn't seen your question before I posted, but I hope I've saved Paul some time.

Thanks (0)
Replying to Tax Dragon:
avatar
By paulwakefield1
01st Mar 2024 14:29

Thank you for the thought. Sadly I hadn't seen your reply before digging out the self same reference!

Thanks (0)
Replying to Tax Dragon:
avatar
By Tax Dragon
01st Mar 2024 14:31

Nope :-D

Thanks (0)
Replying to Tax Dragon:
avatar
By FactChecker
01st Mar 2024 14:31

Thank you ... exactly what I expected (and nice, for me anyway, to see those occasions where logic gets one to the same point as legislation or guidance)!

The point is even reinforced in the temporary Coronavirus section where "the only area where this is likely not to be the case (that furlough payments aren't allowable in the claim) is if annual leave or sick leave is taken during furlough".

So whilst sick leave and holiday are seen as "a necessary cost of the employees undertaking R&D work", maternity leave isn't ... possibly because 'necessary' in this case suggests an element of 'without choice'?
Stands back and waits for sky to fall ...

Thanks (3)
Replying to FactChecker:
avatar
By paulwakefield1
01st Mar 2024 14:53

FactChecker wrote:

So whilst sick leave and holiday are seen as "a necessary cost of the employees undertaking R&D work", maternity leave isn't ... possibly because 'necessary' in this case suggests an element of 'without choice'?
Stands back and waits for sky to fall ...

I thought you were going to avoid that puddle. ;-)

Thanks (1)
Replying to FactChecker:
avatar
By Tax Dragon
02nd Mar 2024 06:37

FactChecker wrote:

(and nice, for me anyway, to see those occasions where logic gets one to the same point as legislation or guidance)!...

Stands back and waits for sky to fall ...

You know me too well. But I'll leave the sky in situ and instead provide a gentle... let's say reminder, rather than rebuke. We're all friends in here.

The fact is that logic and law don't always get one to the same point. Law must prevail, where there's a difference in endpoint.

References to law can be made via citations. Where a respondent answers based solely on logic, what citations can be provided?

Thanks (0)
Replying to Tax Dragon:
avatar
By FactChecker
02nd Mar 2024 12:17

Not sure that your 'reminder' is required (unless it's for the wider audience) ... although your editing of my earlier post makes it seem to be.
The potential falling of sky belonged after the 3rd para (not the 1st one as you show it) ... and I fully accept (always have and always will) your point about citations.

My as usual frivolous comment in parentheses was, if anything, a dig at myself on that very point ... based on how much I rely on logic (my staple in life) to even get me looking in the right legislative place - by which time I find I'm often looking for confirmation of what I think is the answer, rather than enlightenment.
That confirmation is of course often not forthcoming, so I enjoy it when it's there!

As you say, no rebuke taken nor intended in return ... just clarification. :=)

Thanks (2)
Replying to Tax Dragon:
RLI
By lionofludesch
02nd Mar 2024 13:07

Tax Dragon wrote:

References to law can be made via citations. Where a respondent answers based solely on logic, what citations can be provided?

"Lion says it is", is generally a winning argument with HMRC.

Thanks (1)
Replying to FactChecker:
avatar
By paulwakefield1
01st Mar 2024 14:24

"However, can you provide a reference for your statement regarding 'sick pay' being included within 'attributable employment costs' for an R&D claim?"

From CIRD83200: "HMRC consider that paying holiday pay and sick pay is a necessary cost of the employees undertaking R&D work and is, in effect, part of the cost of their working time."

Thanks (0)
Replying to paulwakefield1:
avatar
By FactChecker
01st Mar 2024 14:37

Thanks (and to TD as well). But to go back to your post at the start of this now somewhat mangled sub-thread ... by paulwakefield1 01st Mar 2024 13:39:
"Whilst I agree with these arguments, sick pay and holiday pay is allowable. Is SMP so different?"

Are you now happy that SMP is indeed treated differently (in this context)?

Thanks (2)
Replying to FactChecker:
avatar
By paulwakefield1
01st Mar 2024 15:00

Oh I think so. Thought it was worth floaing even though, as I said, I could understand the logic of the preceding arguments.

Thanks (0)
Replying to JanetHewitt:
avatar
By FactChecker
01st Mar 2024 13:16

Not only, as others have said, is the fact of what "the person would normally work on" wholly irrelevant to the requirements for costs included in an R&D claim (which not surprisingly relate to the costs whilst doing the R&D work) ... but the fact that SMP is being paid means that you MUST NOT be allowing the employee to do any work or attend (other than KIT days).

So, I'm afraid you're caught at both ends. If I had a more cynical turn of mind, I might enquire what kind of R&D and how dependent it is on the activity of this one employee? But that's not the concern of this thread.

BTW if you'd clarified your involvement in raising the question ... employee or employer or agent or ... the answers might be a tad more focussed.

Thanks (2)
Replying to FactChecker:
By Duggimon
07th Mar 2024 09:44

FactChecker wrote:

... but the fact that SMP is being paid means that you MUST NOT be allowing the employee to do any work or attend (other than KIT days).

The same is true of sick pay.

I'm still unconvinced that maternity pay can't be included in an R&D claim. Imagine the hypothetical company whose work is all R&D - this is not a purely hypothetical situation, I'm sure some startups are to all intents and purposes 100% R&D.

How could you argue the cost of maternity pay, a necessary cost of having staff, for staff who by definition can only work on R&D because that's all of the work you do, should be excluded from the claim, particularly when holiday pay and sick pay are specifically included and only apply to periods for which staff cannot by definition be working on R&D.

CIRD83200 could specifically exclude maternity pay were it HMRC's view it was excluded, it specifically excludes other things that might by the same argument be included. It seems from the manual that HMRC haven't taken a view on it, so I would tend towards including it where there's an area open to interpretation and one interpretation favours my client.

Of course, were my client in the position of having me make a call on this, I'd be giving a bit more thought and research to it than I've given to this response!

Thanks (0)
Replying to Duggimon:
avatar
By 17RDR12
07th Mar 2024 11:53

I can't be bothered to sift through the legislation now but FWIW all the guidance I have received from R&D Tax experts (real ones not the cowboys), has instructed that maternity pay is not allowable for the claim.

It actually surprises me that sick pay is allowed, although holiday pay makes perfect sense to me.

Thanks (0)
Replying to 17RDR12:
By Ruddles
07th Mar 2024 14:47

Agreed. Holiday is a legal entitlement, and effectively forms part of the worker's role. Pregnancy is not a legal entitlement that comes with the job.

Sick pay - I am also not so sure but I guess that everyone is expected to fall ill from time to time and there is usually a contractual entitlement to sick pay and/or SSP (does that still exist?) and so I would say it is more similar to holiday pay than it is to a (usually) voluntary pregnancy. But if someone is off sick on a long-term basis, I would accept an argument that pay for that period should not qualify for R&D.

A logical way of looking at it might be to ask if someone needs to be hired/seconded to carry out the work of the person who is absent. This is unlikely to be the case in instances of holidays and short-term illness. But I suspect that in the case of maternity leave an extra body may need to be brought in to cover the work - with the consequence that relief might otherwise be available twice in respect of the same work.

Thanks (0)