


What is Research and Development?
The term Research and Development (R&D) can conjure up a variety of meanings for different people within different businesses.
To ensure that the term is consistently applied in terms of R&D tax incentive claims, the Government has produced a set of Guidelines which detail what constitutes R&D. As specialists in the field, we will work with you to ensure that you have a full understanding of what does and does not qualify for inclusion within your R&D claims and help you apply this understanding to your business.
Fundamental to the R&D tax incentive is that a claimant business is undertaking pieces of work or projects in the pursuit of new or improved knowledge within science and technology.
For a project to qualify for inclusion within an R&D claim it must satisfy both the following criteria:
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It is seeking to achieve an advance in science or technology; and
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There is scientific or technological uncertainty in how this will be accomplished.
The Government has purposefully defined R&D in this broad manner to capture as many sectors within science and technology as possible. Accordingly, it is necessary to break this definition’s constituent parts down further to correctly apply the Guidelines to your business.
Advance
An R&D project’s advance can relate to several things, be it the development of a product, process, service, material or even an intangible piece of knowledge. An advance’s key facet is that it seeks to move the area of science and technology in question beyond the state of play and level of know-how in the public domain at that time.
Practically, the advance will aim to produce something new, improve on what is already available or reverse engineer and duplicate an existing product or process where the underlying know-how was proprietary to a third-party. Importantly, there is no requirement for a project to be successful in achieving the advance, indeed, failure is often indicative of R&D having taken place.
Uncertainty
Simply speaking, if a project had a certain outcome, it probably isn’t R&D. However, a good marker that a project contains qualifying R&D is where it has pockets of activity where the specialist(s) in the field of science or technology in question (referred to as competent professionals in the Government’s R&D Guidelines) are uncertain how to overcome the technical hurdles in place. Practical indicators of this include trial and error, prototypes created as part of the iterative design process, or possibly even complete dead-ends along the way.
Uncertainties determine when an R&D project starts and ends. Namely, when work to resolve the scientific and technological uncertainties start, the R&D project starts; and when such work ceases, either due to the project being abandoned or due to the uncertainties being resolved, the R&D project ends. Costs attributable to planning, design, testing and analysis in relation to overcoming such uncertainties can be included within your claim.