What Qualifies as R&D for Tax Credits in the UK?
A practical guide to understanding what software development work qualifies for R&D tax credits under HMRC guidelines, with real examples from tech companies.
If you're running a tech company in the UK, you've probably heard about R&D tax credits. But the question that keeps finance teams and founders up at night is simple: what actually qualifies?
After 7 years of claiming R&D tax credits and 28 quarters of documentation, I've learned that the answer is both simpler and more nuanced than most people think.
The Core Principle
HMRC's definition of R&D centres on one concept: seeking an advance in science or technology through the resolution of scientific or technological uncertainty.
In plain English: you were trying to do something that wasn't obvious how to do, and you figured it out.
What Counts as Technological Uncertainty?
For software companies, uncertainty typically falls into these categories:
1. Performance at Scale
You needed to make something work at a scale where existing approaches wouldn't cut it.
"We had to process 10 million transactions per second. Standard database approaches created unacceptable latency. We had to develop a novel caching strategy."
2. Integration Challenges
You had to make systems work together in ways that weren't straightforward.
"We needed real-time sync between a legacy COBOL system and a modern GraphQL API. There was no documented approach for this."
3. Algorithm Development
You created new methods to solve complex problems.
"Existing fraud detection models had 40% false positive rates. We developed a new approach combining graph analysis with behavioural patterns."
What Doesn't Qualify
Not everything your engineering team does counts:
- Routine development using well-established patterns
- Bug fixes unless they reveal deeper technical uncertainty
- UI/UX improvements unless they involve novel technical challenges
- Simply learning existing technologies
The Documentation Challenge
Here's where most companies fall down. HMRC doesn't just want to know that you did R&D. They want to see:
- What uncertainty you faced (before you started)
- What approaches you tried (including failures)
- How you resolved it (the advance you made)
- Evidence linking claims to actual work
This is exactly what we built Evidencestack to solve. Your git history, PRs, and tickets already contain this evidence. We just translate it into the narrative format HMRC requires.
Coming soon: How to identify qualifying projects in your backlog, and the most common mistakes companies make when claiming R&D tax credits.