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 Science, Innovation & Technology (DSIT). The DSIT guidelines are broad, surprisingly accessible, and relatively short.
To qualify for R&D Tax Credits, the project needs to be seeking an advance in science or technology through the resolution of scientific or technological uncertainty. The solution of these uncertainties must not be readily deducible by a competent professional working within the field. The keyword here is ‘readily,’ i.e., if the R&D requires significant effort, then the likelihood it is not something that is readily resolvable. Therefore, any work done to deliver significant improvements to an existing product/service/process/material most likely contains qualifying R&D.
This is an important question and sets the scene for defining the sought advance in the project. An analysis of the baseline enables a greater understanding of the existing knowledge or capability that existed at the time the project started, and which the company intended to advance
In essence, the baseline defines what is known or is already available in the public domain. If there is a gap in knowledge or capability, then this produces uncertainty, which necessitates R&D.
An advance in science or technology is achieved when a project seeks to extend 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 someone who has an understanding of the current baseline in technology, either through industry 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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