For many business owners, R&D tax relief sits in that grey area of “we’ve heard of it… but does it actually apply to us?”

In this episode of Let’s Figure It Out, Luke Adams and Sophie Wright are joined by R&D specialist Lisa Waller to unpack one of the most common and misunderstood questions: how do you actually know if you’re doing R&D?

What follows is a practical guide to help you recognise it, understand it, and most importantly, not overlook it.

R&D Isn’t What Most People Think

There’s a common assumption that R&D is reserved for cutting-edge labs, tech startups, or major manufacturers. In reality, it’s far broader and far more relevant to everyday businesses.

It may be an important part of your company’s tax position, which should not be overlooked.

As Lisa explains:

“A company of any size can be eligible to claim R&D tax relief, there is no minimum spend requirement, however the amount that a company invests in their R&D is directly proportionate to the amount that they can receive back in benefit.”

At its core, R&D tax relief is designed for businesses that are:

• Trying to advance science or technology
• Facing scientific or technological uncertainty in how to achieve that
• Working through that uncertainty via testing, iteration, and problem-solving

Why “It Depends” Is the Right Answer

When asked whether common activities qualify as R&D, the instinct is to look for a yes or no answer.

But as Lisa puts it:

“It is just not possible to answer these in a quick fire yes or no manner.”

That’s because qualification depends on how and why the work is being done.

For example:

• Switching suppliers to save costs? No.
• Developing a new app? Possibly.
• Improving a process? It depends.

The key question is always this:
Are you trying to solve a scientific or technological uncertainty that couldn’t be easily worked out by a competent professional?

R&D exists when the pre-existing knowledge of a competent professional, despite their expertise, is not sufficient to ‘readily deduce’ a solution from material in the public domain and their own knowledge, and they have to engage in a programme of iterative research and development to try to find one.

What Actually Counts as R&D?

To qualify, your work needs to go beyond routine improvement. It must contribute to advancing knowledge or capability in a relevant field.

Lisa breaks this down clearly:

“There are many relevant fields of science or technology where an advance may be sought but we must always come back to the definitions given in the DSIT Guidelines.”

An advance could be:

• Creating a new product, process or service – so long as this represents an advance in overall knowledge or capability in a field of science or technology and not just bringing your own company up to speed with the latest technology
• Changing or modifying an existing product, process or service to make it better – so long as this is a genuine, non-trivial, and more than a non-routine improvement
• Duplicating the effect of an existing process or product in a new or improved way

For example, creating a product which has exactly the same performance characteristics as existing models, but is built in a fundamentally different way.

The Role of the Competent Professional

A key concept that often gets overlooked is the “competent professional.”

Lisa highlights its importance:

“Many of the crucial definitions… come down to the judgment of a competent professional.”

A competent professional will usually be someone directly involved in the project with professional expertise relevant to the advance being sought.

This is someone who:

• Understands the underlying science or technology
• Knows the current state of the field
• Has relevant experience and a successful track record

Their role is critical in determining whether a solution was ‘readily deducible’ or whether genuine uncertainty existed.

We need to be able to say, “At the start of the project the Competent Professionals did not know whether a solution was technologically feasible and/or how to achieve a solution in practice”.

R&D Happens in More Places Than You Think

R&D is not limited to traditional sectors. It can appear across a wide range of industries:

• Software development
• Engineering and manufacturing
• Food production
• Textiles
• Environmental innovation

The guidelines apply equally to work in any branch or field of science and technology.

However, work in the arts, humanities and social sciences, including economics and business, is not science for the purpose of the DSIT guidelines.  .

Lisa puts it simply:

“If they are seeking to advance science or technology by overcoming scientific or technological uncertainty, then R&D can be present.”

Busting the Biggest Myths

There are a few persistent misconceptions that stop businesses from exploring R&D properly.

“Only tech and manufacturing qualify”

Not true. So long as we’re talking about science or technology, any industry can qualify if the criteria are met.

“If the project fails, it doesn’t count”

Also incorrect.

“If the competent professionals despite their best efforts can’t achieve the goal, this may actually be evidence that scientific or technological uncertainty was present.”

“You need a patent”

No.

“There is no need to take out a patent… it’s not a requirement.”

In fact, many businesses choose not to patent for commercial or practical reasons.

Spotting R&D in Your Own Business

So how do you recognise it in practice?

Start by asking:

• Are we trying to achieve something that isn’t straightforward?
• Did we face uncertainty in how to get there?
• Did we need testing, iteration, or experimentation?

Lisa explains it in practical terms:

“If the competent professionals can’t arrive at a solution… without too much delay or difficulty, but need further information from a process of empirical investigation, testing, trial and error… this is our evidence.”

Often, R&D arises in response to change:

• Supply chain disruption
• New regulations
• Sustainability requirements
• Scaling challenges

These pressures force businesses to innovate, and that’s where R&D lives.

Real-World Examples

Consider these scenarios:

• Reformulating a product to improve shelf life
• Adapting machinery for a unique application
• Integrating complex software systems
• Developing sustainable materials

Each of these could qualify, but only if they involve genuine uncertainty and technical challenge.

Lisa explains:

“If your project is within a field of science or technology, and you’re conducting that project to a method or plan to achieve a goal, and have competent professionals involved that’s the starting point.”

Why It Matters: The Financial Impact

R&D tax relief is not just a technical exercise. It has real financial value.

Lisa outlines the current landscape:

“A company can receive anywhere from 15% to 16.2% of the qualifying expenditure back in tax savings.”

For example:

• £250,000 of qualifying R&D spend
• Could generate around £37,500 in tax savings

For R&D-intensive SMEs, the benefit can be even higher.

The Claim Process: Not One to Wing

While the opportunity is significant, the process is not straightforward.

There are strict requirements, including:

• Pre-notification to HMRC
• Submission of an Additional Information Form
• Detailed technical narratives
• Robust cost breakdowns

Lisa is clear that this is a specialist area:

“R&D tax relief is not straightforward to claim… there have been many compliance measures put in place.. It’s also important to ensure that the costs being claimed for are fully supported by the records so that if there is a challenge by HMRC, the evidence of those costs can be fully provided.”

“That’s why we have qualified accountants with R&D experience working on every claim, and why at Ad Valorem we have a robust quality assurance process that every claim has to pass before it is submitted.”

The Bigger Picture

R&D tax relief is ultimately about recognising and rewarding innovation.

As Lisa puts it:

“Companies that are genuinely undertaking qualifying R&D should not be put off from claiming this valuable tax relief.”

And perhaps the most important takeaway:

“If you’re working in the technology space and pushing the boundaries of what is already available don’t be put off by the complexities involved.”

Final Thought

If your business is solving problems, improving systems, or experimenting to find better ways of doing things, there’s a strong chance you’re already doing R&D.

The question isn’t whether you’re innovative.
It’s whether you’re recognising it.

Contact the Lumina team today to discuss your R&D claim.

(E) enquiries@advaloremgroup.uk (T) 01908 219100 (W) advaloremgroup.uk