The Project Timeframe: When Does Research and Development Start and When Does it End?
Some words have special definitions in tax law that go beyond their every-day English meanings. Getting the research and development dates right will help to show HMRC that your claim has been prepared with these special definitions in mind and will make your claim for relief that much stronger.
The start of research and development
It’s tempting to think that R&D starts from the moment you first sit down to identify new gaps in the market, the moment you begin to review the business’ performance and think “we need to do something new here”, or the moment a new regulation is announced that means you can’t do things the way that you used to. But this isn’t the case.
Research and development actually begins when work to resolve valid scientific or technological uncertainties starts. This is an important distinction, because it means that the point in time at which an R&D project begins might come later than the start of the overall commercial project that the R&D supports. One commercial project might contain many R&D projects, each with their own scientific or technological uncertainties.
The End of R&D
R&D ends when work to resolve valid uncertainties stops – either by abandonment or because the valid uncertainties have been resolved. If there are still commercial questions at this point, such as figuring out the right price-point for your new product or service, then it’s not abnormal to find that the commercial project extends beyond the end-date(s) of the underlying R&D project(s).
Splitting out and framing each R&D project strengthens your claim by showing HMRC that you know the difference between valid technological or scientific uncertainties and commercial unknowns that don’t attract relief.
Planning, Design, and Testing
Activities such as planning how the R&D will be approached, and such as designing and testing new products and processes will qualify for relief to the extent that these activities contribute directly to the resolution of valid scientific or technological uncertainties. More detail can be found in the guidelines linked at the start of this article.