What do you need to prove for an R&D Claim?

Research & Development,

Research and development (R&D) tax credits are a tax relief paid by HMRC to UK companies to reward their efforts towards innovation. Companies that spend money on Research & Development are eligible to claim a Corporation Tax reduction for every £1 they spend on qualifying activity.

The strict definition of qualifying Research & Development is activity to ‘resolve scientific or technological uncertainties’ but it also needs to be a project that makes an advance over existing options.

So how do you prove the activity should qualify?

The HMRC guidance gives four primary criteria that need to be addressed for a claim to be successful, as follows:

1 An advance in the field

Your project must produce a development generally, not just for your business. This means an advance cannot just be an existing process or idea that has not been used before in your industry.

If another company has already developed the process or product, but it has not been widely reported or adopted to become generally accepted, it may still be classed as an advance.

2 Show that a professional in the field could not work this out

Your claim needs to outline why an expert in the industry could not easily reach your conclusion.

This may also include explanations of other attempts to find a solution that were unsuccessful.

This may also include explanations from your R&D team around the challenges they faced during the development process.

3 Show there was uncertainty

A ‘scientific or technological uncertainty’, mentioned above, is deemed to exist only when an expert in the field is unsure a proposed product or solution is possible or an outcome can be achieved, after studying the currently available information.

You cannot already know the solution to the project.

4 Explain how you tried to overcome the uncertainty

Your claim needs to explain the research, testing and analysis that was necessary to complete the project and to overcome the uncertainty detailed above.

This can be a simple description of the successes and failures you had during the project.

The R&D landscape is changing, as HMRC seek to restrict the investment into innovation to the UK economy, so it’s important to keep your claims under regular review and to keep clear and accurate records of the costs, activities and processes undertaken.

Contrary to the image chosen for this post, not all claims are science-based! If you can prove all of the above points, you could be from any industry…

If you’re unsure of what activity might qualify, or would like to discuss a potential claim, please get in touch. Though you need to be careful with the content of a claim, taking the time to collate the necessary information can be extremely worthwhile!

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