What qualifies for Research and Development (R&D) tax relief?

For a lot of companies, R&D is aimed at keeping up with the market and discovering or reverse engineering new products in general.

Unfortunately, such activity does not qualify for R&D tax relief.

To qualify for R&D tax relief, work and associated costs must be part of a specific project to make an advance in science or technology.

If you do have a qualifying project, you’ll need to explain how the project:

looked for an advance in the field

had to overcome the scientific or technological uncertainty

tried to overcome the scientific or technological uncertainty

could not be easily worked out by a professional in the field

If you can successfully explain these, you’ll need the explanation documented alongside a calculation of how you arrived at the amounts involved.

Finally, a word of caution (R&D) tax reliefs have been widely abused, with a whole industry of cold call “specialists” submitting reckless claims on behalf of ill-advised clients. HMRC has recently cracked down on this behaviour and is investigating many of these claims resulting in money having to be paid back and, in some cases, HMRC’s Fraud Investigation service becoming involved.

This doesn’t mean that you shouldn’t consider submitting a valid claim, but it does mean that any claim will be subject to greater HMRC scrutiny than has been the case historically, so it’s important to ensure it is correctly documented prior to submission.