United Kingdom

Guidance for making R&D claims released

HMRC issues its guidelines for compliance on what qualifies as R&D for tax purposes.

The publication of HMRC’s latest guideline highlights the importance of correctly identifying whether a research and development (R&D) claim meets the necessary conditions to qualify for tax relief.  

R&D for tax purposes is defined in s1006, Income Tax Act 2007: “activities that fall to be treated as R&D in accordance with generally accepted accounting practice (GAAP)”. However, s1006 also introduces a regulation-making power to specify activities that are and are not to be treated as R&D.  

The current regulations are The Research and Development (Prescribed Activities) Regulations 2023, SI 2023/293. These cross refer to guidelines on the meaning of R&D for tax purposes, issued by the Department for Science, Innovation and Technology (DSIT). 

R&D that qualifies under the guidelines is R&D for tax purposes. If it does not qualify for R&D in the guidelines, it does not qualify for tax purposes. Note that for accounting periods beginning before 1 April 2023, The Research and Development (Prescribed Activities) Regulations 2004, SI 2004/712 and the earlier guidelines on the meaning R&D for tax purposes apply. 

HMRC reports that it continues to see misunderstandings of what is and is not R&D under the DSIT guidelines. It has therefore issued guidelines for compliance (GfC): Help to see if your work qualifies as R&D for tax purposes. This expands on HMRC’s view of DSIT’s guidelines on the meaning of R&D for tax purposes. HMRC expects this to be read together with the DSIT guidelines when preparing R&D claims. 

The GfC set out: 

  • HMRC’s expectations of claimants; 
  • who is a competent professional, able to judge if a project is seeking an advance in science or technology for the purposes of an R&D claim;
  • how to identify qualifying R&D projects; and
  • a recommended approach to claims and record keeping.