Innovations and R&D tax relief

No. A project often involves failed attempts, technical dead ends, and unresolved challenges. If your project aimed to achieve an advance in science or technology but didn’t fully realise it, or was stopped due to technical limitations, it may still qualify. It’s the effort to resolve uncertainty that matters, not the outcome.

Not at all. R&D can result in new products, but it can also include appreciable improvements to existing products, development of internal systems, or new processes that lead to increased efficiency or capability. What’s important is that there’s a genuine advance in the overall knowledge or capability in a field of science or technology, not just within your business. Even adapting knowledge from another field where this was not readily deducible can count.

Not necessarily. Using modern technology such as AI or machine learning frameworks like TensorFlow or PyTorch does not automatically qualify as R&D. To be eligible, your project must tackle specific scientific or technological uncertainties, for example, developing new machine learning models, enhancing inference performance beyond what is standard, or solving problems that lack readily available solutions. Simply applying existing tools or technologies is not enough.

Yes, the type of relief depends on the timing and nature of the grant.

• For accounting periods starting before 1 April 2024, if your grant was notified state aid, you couldn’t claim under the SME R&D scheme, but you could still claim via the R&D Expenditure Credit (RDEC).
• For accounting periods beginning on or after 1 April 2024, grant funding does not restrict your ability to claim R&D Tax Relief under either the enhanced R&D intensive support scheme or the merged scheme R&D expenditure credit.

Yes, as long as the details of their solution are not publicly available or readily deducible to another competent professional working in that field. If the work you’re doing involves genuine uncertainty and represents an appreciable improvement in science or technology, it may still qualify. The key is that your work is not just the routine analysis, copying or adaptation of an existing product or process. If others have solved a similar problem behind closed doors and you’re working independently to solve the challenge, without access to an obvious solution it may be eligible.

Yes, innovation isn’t the criteria by which eligibility for R&D tax relief is judged. What is key is that the development must represent an overall advance in publicly available or readily deducible knowledge/capability in the field through the resolution of technological uncertainty. We often find that R&D can be overlooked by highly technical teams because they’re so used to operating at a high level. If solving complex technical problems is “just what you do,” you might underestimate the R&D involved. Remember, it’s not about how ground-breaking it feels to you, it’s about whether your work involves advancing overall knowledge/capability and overcoming scientific or technological uncertainty.

HMRC has introduced stricter rules to reduce error and fraud. Two major changes are:

• A Claim-Notification Form, required for first-time claimants or those who haven’t claimed recently. This must be submitted within six months of your year-end. If you don’t submit the Claim-Notification Form you will not be able to claim, as your claim will be automatically rejected.
• An Additional Information Form, now mandatory for every claim. It must be submitted before your R&D claim in the Company Tax Return and includes detailed breakdowns of costs and, projects.

A claim notification form needs to be submitted within the claim notification period, this runs from the first day of the accounting period to six months after the end of the accounting period.

A company must submit a claim notification form if:

• It has never submitted an R&D claim before, or
• Its last claim was submitted more than three years before the end of the claim notification period, or
• The only claim(s) it has submitted in the three years up to the end of the claim notification period:
  • Was for an accounting period starting before 1 April 2023 and was submitted by way of an amended tax return on or after 1 April 2023
  • Was rejected by HMRC and removed from the Company Tax Return

From 1 April 2024, most overseas subcontractors and externally provided worker costs are excluded from UK R&D claims. There are very limited exceptions, for example, if work must be done abroad for legal, regulatory, or geographical reasons, such as clinical trials or marine research. Clear justification is required for any costs deemed to meet the exemptions. Other overseas costs such as software costs or consumables can still be included in the claim.

Yes, your involvement is essential. A credible claim relies on direct input from those with deep technical knowledge of the work, whether that’s you or someone else on your team. HMRC expects detailed, accurate narratives from competent professionals. Claims based on surface-level understanding or short conversations with advisors are less likely to include the required detail of the technology or science underpinning the advance and are more likely to attract scrutiny or be rejected outright.