What work doesn't qualify as R&D?

This entry is about which activities qualify. Which costs qualify is a separate question with its own rules.

Fields that are outside science and technology

Science is the systematic study of the nature and behaviour of the physical and material universe. Work in the arts, humanities and social sciences, including economics, is not science for this purpose.

That excludes a lot of genuinely original work: market research methodology, organisational design, behavioural studies, financial modelling whose novelty is economic rather than technical, and design work whose advance is in appearance rather than in how something functions.

Mathematics is the exception that moved. For accounting periods beginning on or after 1 April 2023, a mathematical advance is treated as science in its own right, whether or not it advances our understanding of the physical world. For earlier periods, it was only within scope where it did.

Routine work

The guidelines exclude routine analysis, copying or adaptation of an existing process, material, device, product or service. Three patterns account for most of what falls here:

• Applying known technology to your situation. Configuring, integrating and deploying established tools to meet your requirements, however specific those requirements are.
• Catching up. Work that brings you into line with what the field can already do. New to you and new to your trade is not enough.
• Minor or routine improvement. Versions, upgrades, performance tuning and bug fixing where the underlying science or technology does not change. The guidelines are specific that improvements, optimisations and fine-tuning that do not materially affect the underlying science or technology are not work to resolve uncertainty.

Activity in the commercial project that is not R&D

The commercial project and the R&D project are different, and most of the commercial project is outside the scope. The guidelines exclude activities that do not directly contribute to resolving the scientific or technological uncertainty, including:

• commercial and financial steps necessary to bring a product to market;
• the non-scientific and non-technological aspects of developing a product;
• production and distribution of goods and services;
• general administration and support services;
• market research, identifying market niches, and examining a project’s financial, marketing and legal aspects.

Aesthetic work sits here too. Cosmetic and aesthetic changes are outside, unless an advance in science or technology is genuinely required to achieve the aesthetic effect — a new pigment chemistry to hit a colour that existing pigments cannot, for instance, rather than choosing between colours.

The exception: qualifying indirect activities

A defined set of supporting activities does count, even though it does not directly resolve uncertainty. The guidelines list seven categories, including scientific and technical information services supporting the R&D, indirect supporting activities such as maintenance, security, administration and personnel work for the R&D, ancillary activities such as leasing laboratory space and maintaining R&D equipment, training required to support the R&D, research by students and researchers at universities, research to devise new testing, survey or sampling methods, and feasibility studies to inform the strategic direction of a specific R&D activity.

The wording that matters is “for the R&D”. General overheads do not become qualifying indirect activities because R&D staff benefit from them. HMRC’s compliance guidance gives the example of a general IT system upgrade used by the R&D team— rejected because it was not specific to the R&D project. HR work to recruit R&D staff has likewise been treated as too remote.

Work outside the project boundaries

R&D begins when work to resolve the uncertainty starts and ends when the uncertainty is resolved or work to resolve it ceases. It also ends when the knowledge is codified in a form a competent professional could use, or when a prototype or pilot with all the functional characteristics of the final product is produced.

Before the start. Deciding to build something, scoping the commercial opportunity, choosing a supplier. There cannot be a qualifying project before a plan or method to resolve identified uncertainties exists — and if a discovery is made outside a qualifying project, the work that produced it is not claimable, though work to develop it afterwards may be.

After the end. Proving out a solution that already works, testing for regulatory certification once the functionality is settled, scaling to production, launch. Where a problem arises later that itself requires an advance, that is a new piece of R&D with its own boundaries — not a continuation of the old one.

Position for accounting periods beginning before 1 April 2023

The earlier guidelines, issued in 2004 and updated in 2010, exclude the same activities in the same terms, and the list of qualifying indirect activities is the same. The only difference is the treatment of mathematics, as described above.