What is scientific or technological uncertainty for R&D tax?

When discussing potential R&D projects with new clients to ascertain whether they are eligible for R&D tax relief, the key thing that I need to know is whether or not the project contained scientific or technological uncertainty. I’ve had many conversations with clients where they have told me about super innovative projects yet implementation of the novel idea was relatively straightforward.

The definition of R&D in the tax guidelines states that R&D takes place when a project seeks to achieve an advance in science or technology. The definition goes on to state that activities which directly contribute to achieving the advance through the resolution of scientific or technological uncertainty are R&D.

In simple terms, for R&D to take place, there must have been an attempt to resolve scientific or technological uncertainty to achieve the sought advance. If we cannot show that uncertainty was present during the project, then there was no R&D (as per the R&D tax guidelines!).

OK, but what does scientific or technological uncertainty actually mean?

The R&D tax guidelines specify that scientific or technological uncertainty arises 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.

It goes further adding that it often occurs when trying to turn something that has already been established as scientifically feasible into a cost-effective, reliable, and reproducible process, material, device, product, or service.

When we break the first part down, we must be able to demonstrate that there was some form of scientific or technological doubt present. Secondly, we need to be able to demonstrate that the competent professionals working to resolve the problem did not know with certainty that the solution would work.

In order for us to show that scientific or technological uncertainty has taken place, I usually ask two very important questions.

Was the solution to the problem available in the public domain?

• i.e., Could you spend several hours researching to find a solution?

Could someone with your level of competency working elsewhere in the field readily resolve this problem?

• i.e., is this problem challenging on an industry level or just to you?

The reason that I ask these questions is to ascertain the level of scientific or technological uncertainty that was faced in the R&D project. Uncertainties that can be readily resolved by other competent professionals working in the field (i.e., without carrying out R&D themselves) are not scientific or technological uncertainties. Furthermore, any uncertainties that can be resolved by readily available data in the public domain do not meet the criteria set out in the guidelines.

There are, however, three key points in the R&D tax guidelines that I feel are worth mentioning when thinking about the presence of scientific or technological uncertainty in R&D projects.

• If a particular advance has already been achieved or attempted elsewhere in the industry but the details (for example, technical know-how) are not readily available in the public domain, (for example, due to trade secrecy or working at the cutting-edge) then we can demonstrate scientific or technological uncertainty is present and the work to achieve the advance is eligible R&D activity.
• System uncertainty is a type of scientific or technological uncertainty that results from the complexity of a system rather than uncertainty about how its individual components behave. The example used is electronic devices. Although the characteristics of individual chips are fixed, there can still be uncertainty about the best way to combine those components to achieve an overall effect. Therefore, work that combines standard technologies, devices, or processes can involve scientific or technological uncertainty even if the principles for integration are well known.
• R&D projects that were unsuccessful and failed due to technical reasons even when efforts were made to overcome them, provide strong proof that scientific or technological uncertainty existed. It does not matter if the advance sought by a project was not achieved, it is the attempt to resolve the uncertainty that forms the R&D.

Conclusion

In summary, scientific or technological uncertainty refers to situations where

• The knowledge of how to overcome the uncertainty is not readily available in the public domain. There is no obviously known solution or straightforward method to achieve the technical outcome.
• Competent professionals working in a similar field would also struggle to resolve the uncertainty without carrying out their own R&D to find a solution.
• The outcome of the R&D is not readily predictable based on existing knowledge or capability.
• The complexity of a system makes it unclear about the best way to combine individual components to achieve an overall effect.

TBAT Innovation specialise in helping businesses navigate the intricacies of R&D tax relief claims. Our experts can identify eligible projects, ensuring they contain elements of scientific or technological uncertainty required for R&D tax relief. We provide comprehensive documentation that aligns with HMRC guidelines, helping to maximise your claim’s value. Additionally, we offer ongoing guidance and support throughout the entire claim process, making it as seamless as possible for your business. With TBAT Innovation’s assistance, you can confidently tackle the complexities of R&D tax relief claims, ensuring that your innovative projects receive the recognition and financial support they deserve.

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