Inside an HMRC R&D enquiry: Advanced processor development

The inspection into R&D tax claims has increased significantly in recent years, especially for companies who operate in highly technical sectors.

From AI to semiconductors, there are lots of different aspects within the technical industry and as this innovation continues its evolution, so does the challenge of explaining scientific and technological developments to non-specialist R&D tax credit reviewers.

In this blog, we are going to be exploring an HMRC R&D compliance check and how we supported one of our clients through their R&D tax credit claim. 

The claim was submitted for the 2022-2023 financial year and our role was to ensure the project was clearly evidenced. We also had to showcase how the work aligned with HMRC’s statutory criteria for R&D tax relief.

Overview of our client’s case

Our client is a technology consultancy specialising in ASIC and SoC design and verification. Their expertise spans 5G/6G and automotive wireless SoC verification, covering full-chip automotive SoCs and RISC-V architectures for AI workloads. They offer comprehensive services positioning themselves as a trusted partner for innovative and high-quality technology solutions.

Why HMRC chose to open a R&D claim enquiry

HMRC opened a routine compliance enquiry, raising questions across several core R&D eligibility criteria. 

Firstly, HMRC queried whether the project resulted in a genuine technological advance within the wider field of processor and semiconductor engineering, rather than representing an improvement that is company-specific.

HMRC then examined the nature of our client’s technological uncertainty and raised questions regarding the challenges faced during R&D. They questioned whether these challenges were aligned with the scientific or technological guidelines and whether they could be resolved using existing knowledge and standard engineering practices.

A key area of focus was whether the steps taken to overcome these challenges were readily deducible by a competent professional working in the relevant field. This is common from HMRC to assess whether experimentation and iterative development were genuinely required, or if the outcome could have been reasonably predicted from the beginning.

HMRC also challenged their definition of the industry baseline at the time the project began and whether a competent professional could reasonably have predicted the outcome without undertaking R&D. These are common lines of enquiry, particularly for businesses with technically advanced claims.

Technological advancement, uncertainty and solution

This company’s journey focused on advanced processor technology throughout this R&D period. After building upon the existing project foundation from the previous year, they continued focusing on processing power and efficiency for applications that were in high-demand while still aiming to resolve the uncertainties faced. For example, the challenges around memory encryption and pipeline optimisation for heterogeneous workloads. The efforts for this year pushed beyond the boundaries of technological advancement.

When it came to resolving these technological uncertainties in YE2023, their project addressed complex uncertainties, some of which were continued on from YE2022. These challenges required an engineering approach that was innovative and a deep understanding of performance enhancements specific to their particular systems. It was also important to ensure that both new and existing uncertainties were met with solutions that were scalable and robust.

The uncertainties were successfully addressed and resolved, achieving major advancements in the processor design and maximising the capabilities of technology previously thought as limited. They had customised instruction sets integrated into their existing architecture to optimise execution efficiency without compromising what was already going well in the project. They achieved this through an intensive period of testing and feedback from domain experts, and within time this led to finely tuned instruction sequences that targeted their goals much more efficiently. 

These solutions not only resolved the uncertainties faced during the project, but they also elevated the capabilities of the processor especially for AI and ML workloads. The company felt this was a crucial step forward in their technological development.

How Alexander Clifford helped support this company’s R&D claim

At Alexander Clifford, we pride ourselves on the premium support we provide for R&D tax relief. Client enquiries are our top priority from the initial call to the end result of the claim for that year end, and this case was no different. Whether the question is small or large, we are always happy to share our advice with the client to ensure peace of mind throughout the R&D claim process.

We began this process by talking with the client and seeing exactly what was occurring so far with their R&D claim journey. Once we spoke to them, we devised a plan that was clear, efficient and effective so they can achieve the success they set out to achieve. 

Our approach for this enquiry was to create a glossary of terms that HMRC could recognise as an alternative meaning. We also provided the agent with clarity on areas that they could have gaps in their knowledge. Then, we simplified the claim to ensure that all areas are covered and nothing was lost in translation during this process. 

Throughout the entire process, we ensured that we cross referenced with HMRC’s R&D tax relief compliance guidelines so that we stayed within the requirements, while also explaining every step of the process to our client with meetings as their case progressed. We made sure that there was no room for misinterpretation by addressing all the possible ways that HMRC could have misunderstood the work in advance. 

How we can help you with your R&D tax credit claim

As one of the UK’s leading R&D tax credit specialists, our team of dedicated R&D experts can take the reins of your R&D claim, ensuring it aligns with HMRC compliance requirements.

If you are looking for a reliable and straightforward solution to your R&D enquiries, contact us today to begin your R&D tax credits journey and unlock benefits you may have previously overlooked.