Novelty vs Advancement

Throughout history advancements and novelties have played a pivotal role in pushing the boundaries of human knowledge and consequently improving our lives. Whether it was during the agricultural revolution12,000 years ago, the digital revolution which started in the 1980s, or the internet and renewable energy revolution in the 2000s, novelties and advancements have been an integral part of human progress and they continue to shape our world, inspiring new generations to innovate and solve challenges of the future.

Although technically novelties and advancements share a lot in common in terms of their technical definition, from an R&D tax credit perspective a novel idea in of itself may not meet the definition of an advance for R&D tax purposes.

What is a novelty?

Generally, a novelty refers to something that is new, unique, or original. In essence, a novelty is an attribute of an object, idea, concept, product, or experience that sets it apart from what has been seen or experienced before it occurs.

In the context of R&D, a novelty is often the goal sought after. Additionally, novelty is a fundamental requirement for obtaining intellectual property, particularly patents. Commercially, achieving novelties can provide businesses with a competitive edge. Businesses who can introduce novel innovation solutions often get to enjoy first-mover advantage in addition to differentiation from their competitors which, consequently, attracts customers, generates excitement, and drives market adoption.

Novelty is also a key factor in obtaining funds when evaluating research proposals. Funding is often granted to projects that demonstrate high levels of novelty and potential.

Ideally, achieving a novelty using unknown methods or new technologies can significantly enhance the level of novelty and the originality of the research contribution. However, a novelty can still be achieved if it was discovered using known methods. For example, novelties can be represented by incremental improvement of existing methods of technologies. Also, a novelty can be achieved by combining two technologies together to achieve a new outcome or by applying commonly available methods in new context or application.

As novelties can be subjective and may vary depending on the specific field or industry, it is always important to try and quantify or measure the novelty against a well-known criterion for example, performance metrics, efficiency calculations, cost-reduction, etc.

What is an advancement?

As per HMRC’s definition, an advance in science and technology means an advance in the overall knowledge or capability in a field of science or technology (not a company’s own state of knowledge or capability alone). This includes the adaptation of knowledge or capability from another field of science or technology where this adaptation was not readily deducible. An advance in science or technology may have tangible consequences like a new product, or intangible outcomes like process improvements, for example.

From an R&D tax credit standpoint, a novelty achieved using commonly available knowledge or without resolving technical and scientific challenges is not advancement. In essence, a technical or scientific novelty is an advancement from an R&D tax credits perspective if it was achieved using knowledge not available in the public domain by resolving technical and scientific challenges.