The R&D Tax Credits schemes were designed to be applicable to any industry that is undertaking R&D, meaning that the same set of rules apply to the textile and software industries as they do to biochemistry and subsea industries! What qualifies as R&D in HMRC’s eyes is laid out in The Department for Business Innovation and Skills Guidelines on the Meaning of Research and Development for Tax Purposes, also (thankfully!) known as the BSIT guidelines.
The BSIT guidelines are broad, surprisingly accessible and relatively short (unlike their moniker!), however, below we’ve tried to summarise what qualifies as R&D for the R&D Tax Credits scheme.
To qualify for R&D Tax Credits relief, the project needs to be seeking an advance in science or technology by the overcoming of scientific or technological uncertainties. In addition, the resolution of these uncertainties must not be readily deducible by a competent professional working within the field. This means that if you are developing something that is significantly ‘better’ than your competitors or making significant improvements to an existing product/service/process/material, your work probably contains qualifying R&D.
This is an important question and sets the scene for defining the advance, though it is not mentioned in the DSIT Guidelines! It is described for the information required for Additional Information Form, when submitting your technical report:
“Describe the level of knowledge or capability that existed at the time the project started and which the company intended to advance”
The baseline defines what is known, that can be applied that would be routine or existing knowledge on how to solve a problem.
An advance in science or technology means an advance in overall knowledge or capability in a field of science or technology (not a company’s own state of knowledge or capability alone).
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 in the public domain or deducible by a competent professional working in the field.
A competent professional is one that has a good understanding of the current baseline in technology, either through experience or qualification. In resolving the uncertainty they can demonstrate how the current baseline does not resolve the uncertainties and these are not readily resolved or routine to solve.
A number of different directly contributing and indirectly qualifying activities are eligible for R&D Tax Credit relief. These can include work that you do to develop your own products/services and in some circumstances, work that is done on client projects. A non-exhaustive list of eligible activities can be found below:
Information Management Systems, develop, as to provide a faster and more efficient workflow.
All of the above activities must be focused on achieving an advance in science or technology. Work to overcome non-scientific/technological uncertainties is not R&D.
Activities which do not directly contribute to the resolution of scientific or technological uncertainty include:
If you are unsure whether your work qualifies as R&D please contact TBAT who will put you in contact with one of our specialist consultants.
If you’re looking for additional help with your R&D Tax Credits claim, please contact us.
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