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Where scientific and technological uncertainties exist, it is not unusual for multiple innovative businesses to be endeavouring to resolve them resulting in rival R&D being conducted.
There can be no guarantee that the work conducted by innovative businesses will be successful before someone else finds a solution to the same problem.
This situation does not automatically invalidate an R&D tax relief claim, but it does raise some issues that need to be addressed, especially if an R&D tax relief claim was submitted by a rival company.
What happens when two innovative businesses seek the same advance?
The frustrations and challenges felt within a sector are unlikely to ever be encountered by just one business, so it is no wonder that competition often arises in R&D.
Fortunately, the challenges posed by rival R&D work are covered in the CIRD 81900 Guidelines, so HMRC are well prepared for these eventualities.
Rather than it being some great Tesla Vs Edison standoff, there is scope within R&D tax relief claims for all parties to benefit.
This means that while innovative businesses should be keeping an eye on the changing state of the sector, the presence of other businesses doing research does not pose a threat to R&D tax relief claims.
There is no need to take the Edison approach of electrocuting animals when, instead, businesses can work with an R&D tax consultant to ensure that the value of research work is still recognised, regardless of rival R&D work being done.
How can R&D tax relief claims adapt to rival R&D?
If your clients have been beaten to the punch in their R&D, they may choose to carry on with the project or abandon it entirely.
If they continue with the project, the discovery of the other advance needs to be addressed directly in the technical narrative and should inform the trajectory of the project itself.
It will be necessary to justify the continued work in response to the rival R&D by highlighting a different advance that is being sought.
This might be that the advance discovered by the rival R&D makes something 10 per cent more efficient, while your client is seeking to make it 15 per cent more efficient.
In many cases, work on the project may cease once it becomes apparent that the rival R&D has achieved the objective.
In this case, a clear timeline of when work began and ended would be necessary to protect the legitimacy of the R&D tax relief claim.
When rival R&D work is being conducted, the main burden of proof is on demonstrating that the work commenced independently.
This is a routine part of the R&D tax relief claim wherein the existing state of the field is established, but the disruption caused by the new innovation makes it a more critical consideration.
While it may be disappointing for innovative businesses to be beaten to the advance, we do not want to see valuable work go to waste.
As such, we can guide you on how to incorporate even failed or abandoned projects into a valid R&D tax relief claim.
To prevent innovative companies from missing out on vital funds, speak to our team today!
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