For the purposes of R&D tax relief, HMRC defines a prototype as “a basic experimental model possessing the essential characteristics of the intended process, material, device, product, or service.” Prototypes are potentially a big part of any project where you are conducting R&D.
HMRC will allow you to claim for any costs incurred in the creation of prototypes. The design, construction and testing of any new qualifying product are considered part of the R&D process. This includes the costs of staff time in the creation of prototypes, any specialist software licences, as well as consumed materials. More details about claimable costs can be found here.
BUT PLEASE NOTE:
- Whilst it is possible to claim for the materials used in the creation of technical prototypes, none of these materials can end up in the finished products.
- Some prototypes are fundamentally ‘marketing’ prototypes and are not intended to prove the resolution of a scientific or technological uncertainty. Such prototypes are not R&D.