How do you establish the existing state of scientific and technological knowledge for an R&D tax relief claim?

Inspiration can strike from the most unlikely places, like how the first chiropractor learned the craft by communing with a ghost.

However, there are few things more disappointing than thinking you have something brilliant only to find that you were beaten to it.

For R&D, it is vital to establish what the existing state of knowledge was for the scientific or technological field in which the advance was sought.

As this can help HMRC understand why the advance is an appreciable improvement, it is worth understanding how to evidence the existing state of knowledge.

What is the existing state of knowledge and how do you show it?

It might be challenging for an innovative business to communicate what the existing state of knowledge is.

There may be a temptation to outline the entire history of a piece of technology in order to show its deep-rooted issues and why an advance is being sought.

While interesting, such information will not serve an R&D tax relief claim particularly well.

Instead, a competent professional should attempt to summarise what the scientific consensus or the technological capabilities were at the start of the project.

The competent professional lends their authority to the matter as it is expected that they would be aware of emerging breakthroughs in science and technology.

Fortunately, HMRC do not have a specific set of criteria that is used to determine whether the evidence for the existing state of knowledge is sufficient.

Instead, CIRD80560 asserts that evidence on the existing state of knowledge “might include any patent searches, reviews of the scientific or technological aspects of competitor products, and trade journal or scientific articles which indicate the state of knowledge and advancement in the particular sector, technology or trade.”

How should the existing state of knowledge be established in an R&D tax relief claim?

Lengthy details about the existing state of knowledge are unnecessary, but it may be helpful to include references to research papers or patents of existing systems.

This will allow HMRC to independently verify the assertions being made around the existing state of knowledge.

Ultimately, the goal of presenting the existing state of knowledge is to juxtapose it with the project itself.

It should be apparent to a non-professional, like an HMRC agent, why the advance is different to what already exists.

This can lead to subtle differences in how the existing state of knowledge is framed, as only the parts that are relevant to the project need to be highlighted.

With the technical narrative, there should be plenty of opportunity to call back to the existing state of knowledge in order to demonstrate how the project sought to make an appreciable improvement.

Even when attempts to make an advance fail, these can be framed as reinforcing the existing state of knowledge and demonstrating the level of uncertainty that the project is aiming to tackle.

As R&D tax consultants, we seek to understand the existing state of knowledge across a range of sectors so that we can better understand the work our clients do.

For accountants looking to help clients with R&D, it may be worth taking the time to understand more about the existing knowledge that is present in the sectors they operate, so that innovation becomes more apparent.

We are on hand to assist with this and can help innovative businesses translate their understanding of the existing state of knowledge into terms that HMRC will understand.

To ensure that innovation can be understood and appreciated, speak to our team today.

Adam Bointon