To have a valid R&D project claim, HMRC look for the existence of Scientific or Technological Advancement and Scientific/ Technological Uncertainty.

Advancment - The advancement criteria for software development can only be met if new knowledge is produced in fields of computer science or information technology. In other words, development of a new software product per se would not meet this criterion. Knew knowledge can be gained through the development of a new process, material, device, product or service or an appreciable improvement to such.

Uncertainty - The uncertainty must be stated at the outset of the (R&D) project and the solution or method of arriving at the solution must not be readily apparent for knowledgeable practitioners. It is expected the claimant should know what is common knowledge in the field. System uncertainty is also eligible but must also create an advancement.

The process by which the solution or failure of the R&D is arrived at must show evidence of a systematic search or investigation (for the advancement) by means of experiment or analysis performed by competent professionals working in the field. The analysis must be theoretical analysis of a scientific or technological problem and not routine systems or requirements analysis.

A R&D project starts at the point where the uncertainty is defined and stops at the point where all steps to its resolution or attempted resolution are known.

A model to help define the differences between a R&D project and a business initiative can be illustrated as follows:

1. The first level is the field of Computer Science. On top of that is the Information Technology level and on these two lie the levels of business process, the firm and commercial environment.
2. Only projects in the computer science and information technology levels are considered for R&D tax credit relief.
3. Software industry segments included shrink wrap software developers, custom application developers, systems integrators, software development as a part of another product and finally scientific/technical software. All of these, including MIS developments, may have eligible projects if they meet the advancement and uncertainty criteria. In other words, there are no excluded categories of eligible software development.

The Strategy

The programme applies to software development projects so review all such projects for R&D content, with a view to filing a claim. Particularly important would be a review of software development done by financial institutions.

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