How to assess your R&D Projects

Overview 📘

Assessing whether your work qualifies for R&D tax relief starts with understanding what HMRC defines as “research and development”, activities that seek to make a scientific or technological advance by overcoming uncertainties that competent professionals couldn’t easily solve.

This guide will help you:

Evaluate whether your project involves genuine technological challenges
Identify which parts of your work qualify as R&D activity
Understand how to allocate staff time and related costs
Distinguish between eligible and ineligible activities

💡 What Makes a Project Qualify?

To qualify as R&D, your project must aim to create or improve something in a measurable, technological way. It’s not about business innovation or commercial success, it’s about technical progress.

Your project may qualify if it:

Creates a new or appreciably improved system, process, service, product, or device
Replicates an existing process or system but in a new or technically improved way (for example, upgrading the architecture of legacy systems)
Represents an advance in the industry, not just within your own business

Even if another company has made a similar breakthrough, your work still qualifies if their solution isn’t publicly available (for example, held as a trade secret).

🔍 Identifying Technological Uncertainty

Technological uncertainty exists when competent professionals don’t know how to achieve a particular outcome or which approach will work best.

You may have qualifying R&D activity if:

An experienced professional couldn’t proceed with confidence
There are several possible technical approaches, but it’s unclear which will succeed
Something works in theory, but it’s uncertain whether it can be developed commercially
Performance, scalability, or security concerns remain unresolved
You must experiment, build prototypes, or iterate multiple versions to overcome issues

In practice, R&D often involves trial and error, prototyping, and investigation, because the outcome is uncertain until the work is complete.

🧩 Determining Eligible Project Time

Once you confirm that your project contains R&D, the next step is to assess how much time your team spent directly resolving technological uncertainty.

It’s rare for a project to be 100% R&D, some development will always be routine. A proportionate approach is expected.

💼 Best Practice

Consider each individual’s contribution and time spent directly on R&D work.
For teams working across multiple projects, create a simple matrix showing time spent per project and activity type.
Keep this high level, HMRC expects practicality, not exhaustive time logs.

Typical Eligible R&D Activities

Eligible Activities	Description
Software or Database Design & Architecture	Developing or optimising system design to solve technical challenges
Proof of Concept or Pilots	Investigating and testing new technical approaches
Development & Coding	Writing or modifying code to overcome technological uncertainty
Testing	Up to the point where uncertainty is resolved
Environment Setup	Building and managing development or test environments
Project Management	Direct supervision or planning of R&D activities
Supporting Activities	Admin or coordination directly contributing to R&D outcomes

🚫 Typical Ineligible R&D Activities

💡 Key point: R&D must involve a technical advance, not just new functionality, design improvements, or automation.

Ineligible Activities	Reason
Operating or Supporting Live Services	Routine operational work, not R&D
Market Research or Feasibility Studies	Commercial rather than technical focus
Routine Feature Implementation	Not linked to scientific or technological uncertainty
User Interaction Design	Interface design and usability testing are not R&D
Automation of Manual Tasks	Automating a process isn’t R&D unless it involves technical innovation
Standard Data Processing	Routine assembly or reporting of data
Standard Encryption or Security	Using existing methods without innovation
Website Creation	Using off-the-shelf tools or frameworks

💷 Assessing Staff and Project Costs

Staff costs, both internal and contracted, usually make up the majority of an R&D claim. But there are other costs that may qualify, such as:

💡 Costs related to routine maintenance, marketing, or commercial production are excluded.

Cost Category	Example
Fixed Fee Development	Payments to third-party developers for specific R&D tasks
Software	Tools or systems used directly in the R&D process
Prototypes	Materials and costs for testing or demonstrating new designs
Consumables	Utilities, materials, or components used during testing

📋 Next Steps

Identify projects involving technological uncertainty.
Map the R&D phases, from problem identification to uncertainty resolution.
Estimate staff time and costs directly related to those phases.
Document decisions, testing, and iterations, evidence supports your claim.
Consult with us if you’re unsure, we can help interpret HMRC’s R&D criteria for your specific project.

✅ Summary

Qualifying R&D projects must involve technical uncertainty and scientific or technological advancement.
Only work directly related to resolving uncertainty can be included.
Staff and subcontractor time make up the largest part of most claims.
Keep proportionate, evidence-based records of your R&D activities.