Considering consumable costs – What can count in an R&D tax relief claim?

Move fast and break things is something that is often said by those who are seeking to innovate swiftly without fear of the consequences.

Many innovative businesses may be hesitant to break things during the research process as the cost of replacing components or creating new prototypes could eat into tight budgets.

Accountants looking to help clients with R&D would do well to know how consumables are viewed in R&D tax relief claims in order to allay some of these concerns and pave the way for more advances.

Can the cost of consumables be covered in an R&D tax relief claim?

For innovation to qualify for R&D tax relief claims, it cannot be easy.

As such, it is expected that there will be a process of trial and error as the advance is sought and this will likely cause some items to be consumed along the way.

If any component is irreparably damaged or altered during the R&D process, it may be able to be included in the costs.

This will only be the case if the consumable item cannot be sold on or used in any other commercial capacity.

For instance, a manufacturer testing a more efficient machine to enhance the speed of a production line may be able to include the costs of any sample materials that were damaged when the machine was too rough and ripped the material it was supposed to turn into a bag.

The distinction between what can and cannot be counted is centred around the ongoing utility of the consumable item.

It stands to reason that things like chemicals and test medicines are more likely to qualify, as once tested they are unable to be used again.

Materials would need to be utterly unusable to be counted and they cannot be incorporated in any form into something that goes on to have commercial value.

It is worth noting that machinery and lab equipment will generally be viewed as capital expenditure and are unlikely to count in an R&D tax relief.

How can consumable costs be included in an R&D tax relief claim?

Having a strong grasp of the technical narrative and the associated costs of materials is imperative for incorporating consumable costs into the R&D tax relief claims.

HMRC may become suspicious if consumable costs are seen to be unreasonably high, as it may seem like the project served as a rage room for a frustrated competent professional who now seeks to recover additional costs.

Being able to justify why consumable items were rendered unusable through the R&D serves two purposes: it demonstrates the required degree of challenge to validate the full claim and justifies the inclusion of the costs.

This does not mean that every single screw needs to have a backstory, but it should guide the preparation of an R&D tax relief claim to ensure that nothing major is missed.

By getting the support of expert R&D tax consultants, like ourselves, you can be certain that your client is able to include all the necessary costs in their R&D tax relief claim.

We help accountants be confident with R&D tax relief support by demonstrating a clear working knowledge of HMRC guidance and expectations so that R&D tax relief claims are accurate and valid.

Should there be issues with consumable costs that result in an enquiry, we can work to defend the claim, provided that the costs were valid.

Don’t let your client miss out on consumable costs in their next R&D tax relief claim. Speak to our team today!

Adam Bointon

Adam Bointon is a Technical Director specialising in R&D Tax Credits for SMEs in manufacturing and software sectors. With over 15 years’ experience, he works closely with businesses to identify qualifying R&D activities and prepare clear, compliant claims. He combines technical expertise with a strong understanding of economics and finance to support successful outcomes. Adam also contributes to industry webinars and CPD sessions, sharing insights on R&D tax relief and HMRC requirements.