MARCH 2019 RESEARCH & DEVELOPMENT
you must be doing work that
‘advances overall knowledge or
capability in a field of science
or technology’(https://bit.
ly/2gk6pGD). And here, ‘science
or technology’ means science or
technology.” She clarifies with
the example of a firm developing
new containers that gives the
microwaveable meals in them
a longer shelf-life as qualifying;
developing new containers that
make the meals look much more
appealing to shoppers does not.
“No matter how innovative the
artistic design, it’s not R&D
in the eyes of the tax man: the
innovation is in marketing, not
in science or technology.”
And then there’s the word
“overall”. Chen says that this
means that firms must be aiming
to create an advance in an
overall field, not just for their
business. “For example, a taxi
cab company that’s upgrading
its GPS mapping system to make
their booking processes more
efficient would not get R&D
tax credits. Similarly, a drinks
manufacturer that develops a
secret recipe for a new line of
fizzy drinks would not get the
tax credits, because that only
advances the business’ own
product offerings.”
Another key criterion the
rules demand is that the project
must be trying to overcome
“an uncertainty that competent
professionals can’t readily
resolve.” On this Chen says
“there has to be uncertainty at
the outset as to how to achieve
the outcome you’re seeking, or whether it is
scientifically possible or technologically feasible.
Anything that could be resolved by hiring a
consultant for a few months or sitting down in a
meeting with the company’s engineers, would most
likely not qualify.”
Typically, and as might be expected, tax law is
complex and so she offers yet another example: “A
car-maker designs a new petrol engine and exhaust
that performs as well as a standard engine but
emits much less pollution. This would pass the test.
However, adapting an engine design already used
in a car to improve the performance of a different
brand of cars would not.”
It’s worth noting that even if the project
ultimately fails, it could still qualify as R&D.
What expenses qualify for R&D relief?
The principles laid out, the next natural question
is what is an ‘allowable’ expense? The rules are
quite clear, explains Chen. She says that staff costs,
often a big part of R&D expenses, are covered by
www.manufacturingmanagement.co.uk 35
JEGAS RA /stockadobe.com KittyKat /stockadobe.com
Yen-Pei Chen
of the ACCA has
seen the number
of R&D tax
claims rise
since 2013
kwanchaift /stockadobe.com
/www.manufacturingmanagement.co.uk
/stockadobe.com
/stockadobe.com
/stockadobe.com