23RD MARCH, 2021

R&D Tax Credits: What Does "Technological Or Scientific Uncertainty" Actually Mean?

Untangling the jargon
 

The R&D Tax Credits scheme is a golden opportunity for companies to fund their innovative plans by offsetting their R&D costs. But while many who seek to benefit may have a general idea of what constitutes R&D, HMRC have a much stricter definition that’s not always easy to navigate.

If your company is creating a new or improved product, service or process, then qualifying R&D may well be part of that by default. Somewhere along the line there will likely be attempts to solve a problem where the solution isn’t obvious - a key indicator of R&D Tax Credit eligibility. Qualifying R&D projects may also include work undertaken for external clients as well as your own business. Plus of course, it is possible to claim R&D Tax Credits even if the project ultimately failed or was abandoned.

Whatever size or industry, if your company is taking a risk by attempting to ‘resolve scientific or technological uncertainties’ then R&D Tax Credits could well result.

It’s the “scientific or technological uncertainty” where people come unstuck

In broad terms, HMRC stipulates that eligible R&D has occurred when “a project seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty.” It sounds a little foggy, but essentially this means that the scientific or technological advancement that occurs must benefit the wider field rather than just the company itself.

Getting your head around this and what it means for your business and your project specifically is not easy. This is particularly the case if your work is highly specialised or if you haven’t claimed before. It’s for this reason that we strongly recommend discussing your R&D projects with us before starting a claim so we can advise you early on.

The formal definition of a scientific or technological uncertainty

An important point to note is that the uncertainty must be directly related science or technology. So a business, commercial or functional challenge would not count as a technological or scientific uncertainty in this context.

According to government guidelines:

"Scientific or technological uncertainty exists when knowledge of whether something is scientifically possible or technologically feasible, or how to achieve it in practice, is not readily available or deducible by a competent professional working in the field.”

Additionally, the knowledge or information must not already be available in the public domain. Again, our team are happy to discuss this with you and how it relates to your project where required.

The clarity test

Although the official legislation doesn’t describe it like this, we recommend applying your own ‘clarity’ test. This means, if your R&D project has made an advancement in science or tech that a competitor could easily replicate (assuming they had the same resources) then a valid R&D Tax Credits claim is unlikely. However, if achieving a certain outcome is not likely to be obvious to a competitor then a claim could be pursued.

The whole point here is that R&D tax relief is designed to drive innovation, growth and competitiveness. It’s not simply about reinventing the wheel so that’s very slightly different to what’s gone before.

An example: Software development

During the course of an R&D project, the development of a specific piece of software or algorithm may be required to get the job done. However it may not be obvious from the outset whether this new piece of software can actually be created, or whether it will even meet the business requirement. This in turn may necessitate technical or scientific advancement (not simply an off-the-shelf solution) and this too could attract R&D Tax Credits.

How R&D Tax Credits relate to software can again be a bit of a minefield, which is why we go into it in specific detail on the Software page of the Myriad Associates website.

Describing the scientific/technical challenges in your technical report

As part of an R&D Tax Credits claim you will need to compile a high quality technical report. Typically, this report explains the features and challenges of your R&D project in more detail, describing to HMRC inspectors exactly what you faced and why you believe your project is eligible.

Accurately and concisely explaining the scientific and/or technical hurdles you encountered is central here and could mean the difference between success and failure. We recommend making your technical around two to five pages of A4, to include up to three projects.

We recently put together our How To Prepare A Technical Report For An R&D Tax Credits Claim article which explains everything in more detail.

Getting to the crux of a technical report, indeed conveying a technical or scientific uncertainty in general, is hard. It’s common knowledge that R&D Tax Credit applications are tough and going it alone is strongly discouraged - this is what makes the Tax Cloud so popular.

Why should I use the Tax Cloud portal for my R&D Tax Credits claim?

Unveiled back in 2017, the Tax Cloud portal is the brainchild of the specialist R&D funding team at Myriad Associates.

Comprising a broad range of R&D professionals from a number of backgrounds and disciplines, Myriad Associates works entirely in the field of R&D funding and tax reliefs. This means we know exactly where all the pitfalls lie, and how to avoid the most common application mistakes. Additionally, our market-leading reputation is second to none, and we’re extremely proud of our 100% success rate. So when you use the Tax Cloud portal, you know you’re setting yourself up for R&D Tax Credit success (it’s less expensive than other options too).

The Tax Cloud portal itself is a step-by-step way of completing and submitting your R&D Tax Credits claim without the fuss. Simply sign up to the Tax Cloud (it’s free to get started) and follow the fully guided steps to enter your figures, company details and technical report. Our experts are on hand at each stage and as the portal is totally cloud-based you can work on your application wherever and whenever you want.

Looking to find out more? See our recent article Why Your Business Needs Tax Cloud or feel free to get in touch with our team.

Barrie Dowsett, ACMA, GCMA
Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud
Start your Tax Cloud claim now Discover if you qualify and ensure your R&D tax claim is maximised. Get started
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Myriad Associates helps businesses maximise tax reliefs and secure R&D grant funds. We specialise in R&D Tax Credits, Video Games Tax Relief, Innovate UK grants, Horizons 2020 grants, and Research and Development Capital Allowance Claims.

  • Submitting R&D tax claims since 2001
  • 100% success rate
  • Over £100m claimed and counting
  • Industry leading specialists
  • In-house technical, costing and tax experts
  • Member of the Research and Development Consultative (RDCC) committee

Meet some of the team behind Tax Cloud

Barrie Dowsett Barrie Dowsett ACMA CGMA Chief Executive Officer
David Farbey David Farbey MA, FISTC, FRSA Technical Consultancy Director
Lisa Waller Lisa Waller CTA, ACCA R&D Tax Manager
Lauren Olson Lauren Olson MA, MISTC Senior Technical Consultant