Eligibility for the R&D Tax Credit scheme
What qualifies as R&D?
HMRC outlines the guidelines on R&D Tax Credits in CIRD81900 – R&D tax relief: conditions to be satisfied: BIS Guidelines (formerly DTI Guidelines) (2004). These are constantly evolving and being updated. The latest changes apply to accounting periods which begin after 31 March 2023. The guidelines can be found in full on HMRC’s website here.
Below we have identified a few areas that may indicate where R&D activity may have been undertaken. Generally, all R&D projects must seek an advance in a field of Science or Technology overall, not only in the Company’s own knowledge. However, it is important to consult HMRC’s guidance and statutory definitions on the meaning of R&D for tax purposes.
Our team regularly consults HMRC guidance and Department for Business, Energy and Industrial Strategy (BEIS) definitions on R&D for tax purposes. Datafox is on hand to discuss your project and help identify potentially eligible R&D activity for tax purposes.
- 1. Developing Innovative Products
- 2. Resolving Uncertainty/ Issue Diagnosis
- 3. Increasing Capability/ Knowledge
- 4. Advancing Capability/ Improving Solutions
Developing innovative new technology or unique solutions to overcome system limitations often requires considerable time, money and risk. Complicated development iterations involving work related to underlying product architecture, novel third-party integration, advanced performance metrics, throughput, data structures and algorithms, involving the resolution of technological uncertainty, may indicate projects that may qualify for R&D Tax Credits.
Routine problem solving and bug fixing is not considered R&D for tax purposes. However, organisations tasked with investigating complex issues and providing more efficient solutions to overcome uncertainties requiring advanced solutions to technological or scientific areas, may be considered qualifying activity for R&D tax purposes. If you have spent time and resources using competent professionals to develop a bespoke solution, rather than an off-the shelf product, your work may qualify for R&D Tax Credits.
R&D comes in many forms and generally if your organisation has set about doing work to break ground in your industry or by developing new products, then you may be eligible to claim for R&D Tax Credits. Work focused around exploring new processes and increasing capacity/ innovation in your field often qualifies.
Organisations often try to innovate when developing solutions for their clients in order to improve solutions presently on the market. If your project advances available scientific or technological capability, by seeking quicker, better, more efficient solutions to problems or uncertainties, then this R&D work may qualify for R&D Tax Credits.
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If you’re ready to apply for your R&D tax refund, please call us on the freephone number below or use this contact form and one of our helpful team will be in touch to help.
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