What Qualifies as R&D?
Overview 📘
Research and Development (R&D) tax relief is a valuable incentive that rewards companies for innovation in science and technology. It’s not just for laboratories or scientists, if your business is solving technical problems or developing new or improved products, processes, or software, you may qualify.
To claim R&D relief, your company must demonstrate that its work:
- Aims to make an advance in a field of science or technology,
- Involves scientific or technological uncertainty, and
- Could not have been easily solved or discovered by competent professionals in your field.
This guide explains:
- What qualifies as R&D under HMRC rules
- How to identify if your project is eligible
- Which costs can (and can’t) be included in your claim
- How and when to make or backdate a claim
💡 The Core Definition
To qualify, your project must aim to:
- Create new products, processes, or services, or
- Make appreciable improvements to existing ones, or
- Use science or technology to achieve something in a new or improved way.
The key is that your work must involve scientific or technical uncertainty, meaning competent professionals could not easily find the solution, or no publicly available information existed to solve it.
Examples of Qualifying R&D Activities
| Sector | Examples of Qualifying Activities |
|---|---|
| Software & Tech | Developing new frameworks, data platforms, AI algorithms, or APIs |
| Engineering & Design | Designing new materials, components, or systems that require testing and iteration |
| Construction | Developing new building techniques or energy-efficient materials |
| Cleantech & Bioenergy | Innovating in renewable energy, battery systems, or carbon capture |
| Agri-food | Improving yield, nutrition, or production processes using technology |
| Life & Health Sciences | Developing medical devices, testing new treatments, or improving diagnostics |
💡 General product development alone doesn’t qualify, there must be a genuine scientific or technological challenge being solved.
📊 Does My Company Have a Qualifying Project?
Ask yourself the following:
| Question | Description |
|---|---|
| Am I seeking an advance in a field of science or technology? | The project must expand industry knowledge or capability. |
| Does the advance go beyond my company’s internal knowledge? | It must push the boundaries of the field, not just your own processes. |
| Am I trying to resolve a scientific or technological uncertainty? | There must be a specific technical problem without a known solution. |
| Are the solutions not publicly available? | The information to solve the problem must not already exist. |
If you can answer “yes” to these, your project likely qualifies.
⏱ When Does the R&D Period Start and End?
You can only claim for the time during which qualifying R&D takes place:
- Start: When work begins to overcome a technical uncertainty, typically after identifying a problem and confirming no existing solution.
- End: When the uncertainty is resolved, or the work to resolve it stops.
🔗 HMRC – When R&D Starts and Stops
🧾 Claimable Costs
| Category | Description |
|---|---|
| Direct R&D Staff Costs | Salaries, NICs, and pensions for employees directly involved in R&D |
| Externally Provided Workers | Agency or temporary staff working directly on R&D projects |
| Subcontracted R&D | Work outsourced to third parties (rules vary by scheme) |
| Software | Software directly used in R&D activities |
| Consumables | Materials and utilities used in experiments or testing |
| Prototypes | Costs of building and testing prototypes |
| Clinical Trial Volunteers | Payments to volunteers in approved medical testing |
| Collaborative R&D | Costs shared with research institutions or project partners |
📝 From 1 April 2024, contributions to independent research are no longer eligible.
While capital expenditure generally isn’t claimable under R&D relief, you may qualify for Research and Development Allowances (RDA), which offer 100% tax relief on certain assets used for R&D.
🚫 Costs That Do Not Qualify
| Excluded Category | Reason |
|---|---|
| Production and distribution | Considered normal commercial activity |
| Land | Not an allowable R&D expense |
| Patents and trademarks | IP protection, not development |
| Rent | An overhead, not directly related to R&D work |
📅 Making and Backdating a Claim
If your company has carried out qualifying R&D but hasn’t yet claimed, you can usually make a backdated claim up to two years after the end of the relevant accounting period.
📘 Example:
If your accounting year ended 31 March 2023, you can submit a claim until 31 March 2025.
🧩 Pre-Notification Requirement
From April 2023, a Pre-Notification must be submitted if:
- You’ve never claimed R&D relief before, or
- You haven’t made a claim in the previous three years.
🔗 HMRC – R&D Pre-Notification Guidance
💡 Summary
- R&D tax relief supports innovation that advances science or technology.
- You must demonstrate uncertainty and a genuine attempt to overcome it.
- Qualifying costs include staff, software, subcontracted work, and consumables.
- Claims can be backdated two years, but pre-notification rules may apply.
- Keep strong records of your R&D activities to support your claim.