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Research & Development FAQs

Do my company’s projects qualify for R&D tax credits?

This is usually the first question we get asked, “How do I know if what we’re doing is what HMRC means by R&D?” The R&D tax credit regulations have some deliberately broad definitions in order to open the scheme up to as many companies as possible. In many ways this is great. But also makes it slightly more difficult to understand how the rules apply to your individual business.

Let’s break it down.

How can I be sure that my project fits the R&D tax credit criteria?

R&D is defined as “seeking an advance in science or technology” by “resolving and uncertainty” in any field, industry or sector. Basically, creating a new process, service or product, or making modifications to improve and exiting process, service or product. There must be the risk of the unknown, the ‘uncertainty’, and it must not be a innovation that is easily found by your ‘competent professionals’.

You may be thinking: I don’t know this is going to work. I’m not sure this is even possible. How can we make this work?

Your project is taking a risk to create an innovation that doesn’t yet exist, or is an improvement on something that has already been produced.

How do I measure the specific beginning and end of my R&D activities?

Your eligible activities start when you are posing the hypotheticals, not easily discovering the answer and you begin to plan how you will investigate your ‘advance’.

The R&D part of your project ends when you can either say, “It worked, it is possible and this is how we did it”, or, “It didn’t work, it’s not possible and this is how we know”. Your initial ‘uncertainty’ is concluded either way. One of the best things about R&D tax credits is that your eligibility is not based on the success of the project. You are getting tax relief for ‘seeking’ an advance, whether it succeeds or fails.

Any expenditure after this point is not included in your R&D tax credit claim. Like, for example, marketing or user-testing.

What if my innovation is a copy of something that’s already out there?

If you are simply making your own version of something, it would not count as R&D. But there are three reasons why a copy could be considered R&D:
  • You are making a new improvement which meets the R&D criteria.
  • The original’s development details are a Trade Secret, or at least not readily available.
  • You may have a matching result, but you got there in an entirely different way to the original.

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