What counts as R&D?

22 October 2021 Tom Whitworth View all News

Research and Development (R&D) is a branch of activity undertaken by companies and other organisations.

In a corporate context, the goal of R&D is usually to develop new services, products, or processes (or improve existing ones).

R&D is a significant undertaking that carries some level of risk to the company, as they try to identify and resolve scientific or technological uncertainties with new or existing systems, processes, or products. It is nonetheless an essential component for a company to grow and stay competitive.

The UK government encourages companies to invest in R&D through generous tax breaks, also known as R&D Tax Reliefs.

What is HMRC’s definition of R&D

So what counts as R&D? In order to qualify for R&D Tax Relief, the activity must meet HMRC’s specific definition of “R&D” – this is as follows:

“The project must relate to your company’s trade - either an existing one, or one that you intend to start up based on the results of the R&D.

To get R&D relief you need to explain how a project:

  • looked for an advance in science and technology
  • had to overcome uncertainty
  • tried to overcome this uncertainty
  • could not be easily worked out by a competent professional in the field”

 

Are there examples of R&D by this definition?

While very specific, the HMRC definition above may not be easiest to directly measure your own R&D projects against. Here are some examples of real projects from companies that Radius has helped save tens of thousands of pounds through R&D Tax Relief.

  • Development or integration of innovative software solutions.
  • Building unique e-platforms,
  • Developing new packaging solutions,
  • Developing environmentally friendly solutions in manufacturing and engineering,
  • Designing and building industrial equipment,
  • Developing new and enhanced printing products,
  • Developing new analytical processes,

For more examples, including how much Corporation Tax was saved for each, you can read nearly 60 detailed R&D examples in our Radius Case Study Guide.

What industries can I do this in?

These tax reliefs are available to companies in almost any industry, providing the work meets the HMRC definition of R&D. Radius has worked with companies across a diverse range of industries, including construction, transport, professional services, science, printing, manufacturing, engineering and software.

Can Radius help me work out what is needed?

Yes. If your company has developed a new product, process, or service, or has otherwise used technical people to solve technical problems, this could be an eligible R&D expenditure. If you are unsure, or wish to get qualified advice, you can book a free 30-minute consultation with one of our R&D experts. Alternatively, you can download our free R&D Eligibility Checklist.

What should I read next?

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