Indirect costs (overheads)

Indirect costs are overheads: rent, heating, general administration, IT, HR, the finance department (everything that supports the project without being attributable to it). Horizon Europe deals with them by not asking. You charge a flat 25% of eligible direct costs and justify nothing.

The simplification is deliberate and it is one of the programme's better features. There is no overhead rate to negotiate as in the United States, no cost accounting model to defend at audit, and no argument about whether the library counts. The 25% is what everyone gets, from a two-person company to a national research organisation.

The base excludes some things. Subcontracting and financial support to third parties do not attract the flat rate, so every euro moved from your own staff to a supplier loses 25% of overhead recovery alongside the supplier's margin. That is a real budgeting consideration, not an accounting detail.

Whether 25% covers your true overheads is your problem. A large university's real indirect rate is typically well above it; a small consultancy's may be below. Nobody adjusts, and there is no mechanism to claim more, so an organisation whose overheads run high absorbs the difference as its own contribution.

Because it is calculated on eligible direct costs, ineligible direct costs cost you twice: you lose the cost itself and the overhead it would have carried. This is one more reason that cost eligibility discipline is worth more than it looks on a budget line.