Knowledge that is easily accessible by anyone is considered to be publicly available. To prove to HMRC that your project is advancing scientific or technological knowledge, you must show that the theory behind the advance you are seeking, or a practical application of an advance, is not publicly available. Therefore, there is a requirement to know “the baseline of science or technology you intend to advance,” i.e. the relevant state of public knowledge in the industry at the time you start any R&D project.
What is publicly available?
Anything that has been published and is therefore accessible to the public is considered to be publicly available. For example, technical manuals, data sheets, published specifications, and research papers would all be considered to be in the public domain. Information published on the internet is in the public domain, however, this is often not scientifically accurate, complete, or detailed enough to implement any advances.
Why is publicly available knowledge important in an R&D claim?
As of August 2023, HMRC requires any R&D claim to show the baseline of what was known at the beginning of an R&D project. You must be able to show the general knowledge or capability that existed in your field at the start of your project.
If a company has achieved an advance in science or technology most of the time the technical detail of what has been achieved would be a trade secret (unless it has been patented). If you are trying to implement a technical design change that a competitor has already achieved, and they have published the details of how the advance works in their user manual, then this knowledge would be considered publicly available, and you wouldn’t be able to claim work replicating this design as your own R&D. However, if the manual showed the result of the advance but not the technical detail of how it was achieved, resulting in you having to carry out your own project to achieve the same advance then this would be considered R&D for tax relief purposes.
There is no requirement to publish the results of your R&D in the public domain, this means that it is possible to be seeking to solve the same uncertainty in the same product at the same time as another company. If the knowledge of how to solve the issue is not publicly available then both companies would be entitled to claim R&D tax relief for their respective projects, even if you came up with the same solution.
Examples
When you set out on an R&D project it is important to show what the advance you are seeking is, and why it is considered an advance in relation to the state of publicly available knowledge in your field, these could be:
- A new product that is not on the market at all
If this incorporates an advance in technology there wouldn’t be any knowledge of how to do this in the public domain.
- Seeking an advance that someone else has achieved but knowledge of how to do this is a trade secret and is not readily available
You know that your competitor has developed a product that can more efficiently process large quantities of data, beyond what is publicly known in your technological field. You undertake a project to achieve the same advance in data processing. Even though you are seeking the same outcome your competitor has already achieved, because the knowledge of how they did this isn’t readily available then the work that you are doing is still considered a claimable R&D project.
- The knowledge of how to make a product is available but how to adapt it to your needs is not.
Your bakery wants to develop a gluten-free chocolate chip cookie. You have already done extensive research on creating gluten-free cookies without chocolate chips, which have the desired physical characteristics (e.g. consistency). However, when you add chocolate chips to your existing gluten-free recipe, the cookie becomes too crumbly. After researching new recipes, for both gluten-free and chocolate chip cookies, you find a recipe that works for your needs. Even though you have taken time to test the recipe this wouldn’t be considered R&D because the recipe was available to anyone. If you had developed the recipe further, in non-routine and not readily deducible ways, to achieve the desired characteristics, then this part of the work would be considered R&D.
Conclusion
The success of an R&D claim relies on the intention to achieve significant scientific or technological advances. Therefore, you must have an understanding of what the state of the publicly available knowledge is around the advance you are trying to implement and be able to demonstrate what is different about your solution.