A plain-English guide to what HMRC treats as research and development (R&D) for tax purposes, and the steps you need to take before you claim. Based on HMRC's webinar "Research and development for tax purposes", with links to the official guidance at the end.
R&D needs a project that seeks an advance in overall knowledge or capability in a field of science or technology. Improving your own company's know-how, or simply using science or technology to make something new, is not R&D. HMRC has reduced claims to zero where the field did not qualify.
They should be able to set out their own experience, the current state of knowledge (the baseline), what the advance is and why it is one, and how it relates to knowledge or capability in the field.
Know when qualifying work starts (work to resolve the scientific or technological uncertainty) and when it stops (knowledge written up, a working prototype created, or the project halted). HMRC can reduce a claim if the boundaries are wrong.
First-time claimants and companies with a gap between claims must notify HMRC within a set window. Every claim needs an additional information form, sent before or on the same day as the Company Tax Return.
There are no special record-keeping rules, but keep planning material and evidence from the beginning of the project, and record how the claim was worked out, including any sampling, estimates or apportionments.
R&D happens when a project tries to make an advance in science or technology. It covers the activities that directly contribute to that advance, plus certain qualifying indirect activities.
An advance means an advance in overall knowledge or capability in the field: knowledge that is publicly available, or that a competent professional in the field could readily work out. An advance in your own company's knowledge alone does not count.
Someone suitably qualified or experienced in the field, who knows the science or technology and is aware of current technical knowledge. Evidence can include high-level qualifications, significant experience, a publication record, industry awards or other public recognition.
In every case, the advance must be in the knowledge of the entire field.
Activities qualify if they directly contribute to resolving the scientific or technological uncertainty, such as planning, scientific or technological design, testing and analysis, and creating or adapting the software, materials or equipment needed. Some indirect activities also qualify: for example, specialist cleaners employed only to clean R&D areas count, but general cleaners who happen to clean those areas do not.
A project ends when the knowledge is written up (for example in a report or scientific paper), when a prototype with all the functional characteristics of the final product or process is created, or when the company stops the project.
You must tell HMRC you plan to claim if you are claiming for the first time, or if you have not claimed within the 3 years before the end of your notification window. The window starts on the first day of the period of account and ends 6 months after its end. A period of account longer than 12 months gives two accounting periods. Miss the window and the claim is invalid, and it cannot be fixed on the tax return.
Every R&D claim needs an additional information form, sent by the company or its agent before or on the same day as the Company Tax Return. It asks for:
An unexpected discovery is not the same as carrying out R&D, so keep records that show the work was planned. Planning material should show the project's aim, how the outcome links to your trade, a review of current knowledge, the difficulties you foresaw and how the project was structured.
For accounting periods beginning on or after 1 April 2024, the old SME and RDEC schemes were replaced by a single merged R&D expenditure credit scheme, with enhanced support for loss-making R&D-intensive SMEs. The tests above for what counts as R&D apply under both. Speak to us before deciding which scheme applies or what a claim is worth.
Thinking about an R&D claim? We can help you check whether your project qualifies, meet the notification deadline and prepare the additional information form.
Talk to us about R&DThis guide is general information based on HMRC's published guidance and is not advice for your specific circumstances. Rules change, so check the official guidance or speak to us before making a claim.