Research and Development (R&D) reliefs support companies that work on innovative projects in science and technology. It can be claimed by a range of companies that seek to research or develop an advance in their field. It can even be claimed on unsuccessful projects.
However, HMRC maintains stringent criteria for what qualifies as research and development – something that may prove difficult to navigate without expert help.
How does HMRC define R&D?
In its guidelines, HMRC defines R&D as follows:
- R&D for tax purposes takes place when a project seeks to achieve an advance in science or technology.
- The activities which directly contribute to achieving this advance in science or technology through the resolution of scientific or technological uncertainty are R&D.
- Certain qualifying indirect activities related to the project are also R&D. Activities other than qualifying indirect activities which do not directly contribute to the resolution of the project’s scientific or technological uncertainty are not R&D.
Under the HMRC’s definition of eligible R&D, scientific or technological advances must benefit the wider field, not just the single company.
What’s “scientific or technological uncertainty”?
It’s when deciding what is classed as “scientific or technological uncertainty” that businesses come unstuck.
According to guidelines, scientific or technological uncertainty exists when knowledge of whether something is scientifically possible or technologically feasible, or how to achieve it in practice, is not readily available or deducible by a competent professional working in the field.
Scientific or technological uncertainty will often arise from turning something that has already been established as scientifically feasible into a cost-effective, reliable and reproducible process, material, device, product or service.
What is not classed as “scientific or technological uncertainty”?
Uncertainties that can readily be resolved by a competent professional working in the field are not scientific or technological uncertainties.
Similarly, improvements, optimisations and fine-tuning which do not materially affect the underlying science or technology do not constitute work to resolve scientific or technological uncertainty.
How do I decide if I can make an R&C claim?
When considering if you have a valid R&D Tax Credits claim, ask yourself the following questions:
- Would your competitors find it difficult to replicate what has been achieved?
- Has your R&D project made an advancement in science or tech that a competitor has not thought of?
- Have you come up with something unique and innovative?
If the answer to these questions is yes then it’s quite likely you will have a claim for R&D.
Cowgills are experts in R&D tax credits claims, with over 15 years’ experience in reviewing, managing and submitting successful claims. Please do get in touch should you have any queries.
Disclaimer
The information was correct at time of publishing but may now be out of date.
