New R&D guidance from HMRC

HMRC has released new guidance on how to find out if work qualifies as R&D for tax purposes and how to avoid common mistakes.

HMRC states that before a claim is made for R&D expenditure, it expects the company to have taken the following steps.

A competent professional, or competent professionals, in the relevant field of science or technology should:

• identify projects that sought to create new knowledge or capability
• confirm that these projects relate to a qualifying field of science or technology, briefly explaining how each project is a part of the identified field
• name the exact uncertainties the projects were seeking to resolve
• explain why the answer to each uncertainty was not readily deducible
• briefly set out both:

1. the state of relevant knowledge or capability in the field
2. why resolving these uncertainties would represent an advance in the overall knowledge or capability of the field at the time the work was undertaken

• identify exactly where each uncertainty began and would end
• briefly explain how the approach to resolving each uncertainty or group of uncertainties was a project or sub-project
• set out the plan for resolving each uncertainty or group of uncertainties
• set out the steps your projects took to resolve each uncertainty, from the beginning of the qualifying project to either:

1. the end of the accounting period
2. the date the project ended if that is earlier.

The company or its agent should, supported by a competent professional as needed, then:

• identify the activities that directly contributed to resolving each uncertainty as part of each project to advance a qualifying field of science or technology
• identify qualifying indirect activities that were part of the project and are listed in paragraph 31 of the DSIT guidelines
• identify the qualifying costs of the qualifying activities from its records
• check if any of the costs of qualifying activities are restricted or disallowed by GAAP, the DSIT guidelines or tax law.

For any company making an R&D claim, the new guidance is well worth a read - www.gov.uk/government/publications/help-to-see-if-your-work-qualifies-as-research-and-development-for-tax-purposes-gfc3