While the scheme is subjective in its application of the guidance, there are clearly defined descriptions in the DTI 2023 Guidelines as to what amounts to R&D for Tax Purposes. It’s crucial that companies seeking benefit from the R&D tax relief scheme make sure that their view of “R&D for business purposes” lines up with HMRC’s definition of “R&D for Tax Purposes”. HMRC has been clear that they expect claims to closely adhere to their guidelines. If they feel that insufficient care was taken when interpreting this guidance, claims could face a higher likelihood of compliance checks and even penalties.

The scope of a qualifying R&D project for tax purposes can be summarised briefly:

A qualifying R&D project for tax purposes amounts to the work undertaken, directly or indirectly, to advance baseline knowledge or capability in a field of science or technology, through the resolution of scientific or technological uncertainty.

This definition hasn’t changed since the Scheme began in 2000, but understanding this definition and what’s meant exactly by “uncertainty” is more crucial than ever to staying in HMRC’s good books.

So, what does “uncertainty” mean in this context? Paragraphs 13 & 14 of the DTI guidelines define a technological uncertainty as:

Knowledge of when something is scientifically possible or technologically feasible, or how to achieve it in practice, is not readily available or deducible by a competent professional working in the field. This also includes system uncertainty.


Uncertainties that can be readily resolved by a competent professional working in the field are not scientific or technological uncertainties. Similarly, improvements, optimisations and fine-tuning which do not materially affect the underlying science or technology do not constitute work to resolve scientific or technological uncertainty.

It’s a mouthful, and it doesn’t do a great job of clearing things up. How can companies better understand and apply these rules to assess their project activities for qualifying work?

Technological uncertainty and eligibility

To establish whether something is scientifically possible or technologically feasible, a competent professional must assess the overall capability and knowledge in that area. This is based on their knowledge, expertise, and on information available within the public domain. Once this has been established, knowledge gaps and technological limitations which prevent a solution from being developed can be identified.

The next step is to ensure that these knowledge gaps and capability can’t be easily resolved by undertaking routine work to solve the problem. This can be done by undertaking existing tests, hiring a third-party subcontractor with more expertise that can provide a bespoke solution, or by routine development. If these actions solve the uncertainty and a new solution or product is developed, then HMRC would consider this to be routine uncertainty as opposed to technological or scientific uncertainty.

But, if these approaches are attempted and fail, HMRC should agree that scientific or technological uncertainty has been established. Congratulations, you have reached the start of your R&D project for tax purposes! Any work undertaken to resolve this uncertainty to the point where you have filled the knowledge gap, achieved target capability, or abandoned this aspect of the project as you were unable to devise a solution would be qualifying activity. This also includes indirect support of these specific activities.

Technological uncertainty and compliance

In order to improve compliance, HMRC are combing through claims. They often focus on uncertainty, particularly in areas such as software development. Claims in these industries have not seen many challenges in the past, possibly due to a lack of expert ability within HMRC to understand the nature of advances in software technology. But, over the last few years, HMRC has developed a better understanding of the application of the DTI Guidelines in this sector.

In previous years it wasn’t unusual to see claims for software projects that described an entirely new bespoke system platform or the development of new functionality. Now, however, it’s more common to see HMRC challenge these claims. They want to understand if existing tools were used in a routine manner to develop a solution, or whether the project truly spanned a gap in knowledge or capability.

Any company claiming R&D tax relief should have a good working knowledge of how the DTI guidelines apply to its projects. Reaching that understanding can be a rocky journey, especially when looking at specific industries like Software or Construction. The R&D Community course catalogue includes online training that covers these areas, as well as more general eligibility guidelines. Each page contains detailed descriptions and includes the first video for each course: