To qualify for R&D tax credits, your project:
must be a distinct R&D project (ie not just small bits of research spread across multiple areas of your business operations)
must be seeking to advance science or technology (ie to increase the overall knowledge or capacity of a field). Advances in the social sciences (eg sociology) or in purely theoretical fields (eg pure maths) do not count
must be related to your company’s trade or a trade that, based on this project, your company intends to expand into
must involve trying to overcome an uncertainty that can’t be easily solved by a professional and to which there are no publicly known solutions
doesn’t need to be successful
Essentially, your project will likely qualify for R&D relief if it tackles an issue in a scientific or technological field, to which the solution is unclear and not known to experts in that field.
As such, a project that researches or develops an entirely new product, process, or service is generally considered R&D. So is a project that seeks to improve an existing product, process, or service in a new way.
A project that involves an advancement that’s already been achieved may still be categorised as R&D if the details of the advance aren’t public knowledge.
Certain indirect actions that contribute to scientific or technological advancement can also be classified as work on R&D for the purposes of calculating tax reliefs. These include maintaining R&D equipment, undertaking necessary administrative work to facilitate a R&D project, and training staff on particular R&D techniques.
Indirect actions that count as work on the R&D project are those that are not directly related to the research itself but which are directly involved in the project. For example, an administrator’s work booking research facilities for use in the project would be included, despite their not doing actual scientific or technological research. An administrator’s work paying employees who are working on the R&D project but who would have been paid anyway (eg for their work on a different project) does not count, as this administrative payroll work would have been done anyway.
For more information, read the Government’s guidance or the HMRC’s manual on what counts as R&D.