Employed vs self-employed: what to consider when claiming R&D tax relief

July 24th, 2020

We have this conversation with all our R&D (research and development) clients: the difference in the rate of tax relief between PAYE employees and sub-contractors.

Many reasons determine whether an individual is employed or self-employed; far too many to list within a short piece.

When the business has driven the situation – perhaps due to the number of guaranteed hours available or the wider cost of employee benefits – what they often haven’t considered is the R&D tax relief available against that person.

If an employee performs qualifying work equal to 50% of their annual time spent, you can claim 50% of their Gross salary, Employer’s National Insurance Contributions and Employee Pension Contributions. However, if a sub-contractor spends 50% of their time on qualifying work, your claim would be restricted to 65% of 50% of the sub-contractors’ invoices.

With this in mind, self-employed contractors are not always the cheapest option for a business.

To discuss the nuances of R&D tax relief in more detail, contact David Herd at david.herd@championgroup.co.uk or call 0161 703 2500.


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