What is the eligibility criteria for R&D?

While qualifying activities for R&D vary across industries, all businesses looking to benefit from R&D tax credits, need to follow a four-criteria model, often known as the four part process.

This model offers a precise perspective that helps determine whether a company is engaged in qualifying R&D activities.

The four part test consists of:

1. Permitted Purpose: This first step is vital. The Research and Development must be intended to generate or improve the performance, reliability, functionality, or quality of a business element. For example, a product, software, formula, or technique.
2. Technological Uncertainty: Step two is all about distinguishing the scientific or technological uncertainty encountered throughout the duration of the project. Some examples of uncertainties include: formulation challenges, system complexities, prototyping, and process engineering.
3. Process of Experimentation: This third stage involves describing the need for a trial and error phase. The business must be able to provide technical information regarding their intention to overcome these scientific or technological uncertainties.
4. Technological in Nature: The final step will need to ensure that the R&D activities fall within the scope of engineering, physical sciences, biological sciences or computer sciences. These are the scientific and technological disciplines that are recognised by HM Revenue and Customs when assessing if the work carried out will qualify as R&D.