What qualifies as R&D activities for the R&D Tax Credits scheme? 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 BEIS guidelines.
The BEIS 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.
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 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 internally
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 us and our specialist consultants will be able to help.