To determine if your business is considered to be in the fields of R&D, HMRC provide several guidelines which must all be met.

1. The business must undertake a project which seeks to achieve an advance in science or technology.

1.1 The advance in science or technology is to mean the overall knowledge or capability in the field of science or technology and not simply the company’s own state of understanding or ability

1.2 The advance in science or technology can include creating a completely new product, process or service; or substantially improving an existing product, process or service

1.3 Where an advance in science or technology has already been made, however it is not readily available (for example, trade secrets), a project which seeks to achieve the same advancement may still be eligible for R&D tax credits

2. Whilst undertaking the project towards scientific or technological advancement there must a key element of uncertainty

2.1 Uncertainty is to mean that it is not known whether it is scientifically possible or technologically feasible

2.2 Uncertainty can also cover where something is known to be possible or feasible, however the practicality of fulfilling or realising the end goal is unclear

3. The project must aim to achieve appreciable improvement

3.1 The improvement should be deemed significant by a competent industry professional

3.2 The improvement should be more than simply a routine or minor upgrade, analysis, or adaptation

3.3 Where an improvement arises from adapting existing scientific or technological knowledge from one field and applied to a different industry, it may be recognised as an improvement

4. The project must directly contribute to the achievement of scientific or technological advancement

4.1 An activity or series of combined activities must attempt to resolve the scientific or technological uncertainty in order to achieve the advance

4.2 This may include building software, material or equipment needed to resolve the uncertainty so long as it is for the sole purpose of doing so

4.3 Planning of scientific or technological activities will be seen to directly contribute to the advancement

4.4 Design, testing and analysis will be considered as directly contributing to advancement

4.5 Commercial, administrative, transportation, storage, cleaning, repair, maintenance, security and distribution activities are not considered to be direct activities for the purpose of achieving scientific or technological advancement

5. Identifying when R&D starts and ends. For the purpose of claiming R&D tax credits, it is important to determine when the activities for R&D begins and finishes. HMRC provides the following guideline:

5.1 “R&D begins when work to resolve the scientific or technological uncertainty starts, and ends when that uncertainty is resolved or work to resolve it ceases. This means that work to identify the requirements for the process, material, device, product or service, where no scientific or technological questions are at issue, is not R&D.”

5.2 Where the R&D for a product, process or service has ended, new problems may arise which re quire additional scientific or technological advances in order to resolve them. This may qualify as a new R&D but a distinction is made between discovery of new problems and routine fault fixing.

6. Where a project fails. It is foreseeable that not all projects will succeed in achieving an advancement in science or technology. Nevertheless, the project can still qualify to receive R&D tax relief where money and effort has been spent on direct activity to accomplish this.

6.1 Where scientific or technological planning activities associated with the project have started but not been taken forward, due to the overwhelming technical or commercial challenges, it will still count towards R&D.

Next Step

What costs can I recover through R&D?

What Qualifies As R&d Min

You Might Also Be Interested In

HMRC Gearing up to Challenge Biotech R&D Tax Credits
Is R&D tax relief just for Pharma & Tech companies?
Private: 2018 Changes to EIS & SEIS
EIS for Knowledge Intensive Companies


Contact form
  • This field is for validation purposes and should be left unchanged.
Back to top
Get in touch