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Can I claim R&D tax credits for a product which is a copy of an existing product? 

by Sunil Bajaj

It is still possible to claim research and development (R&D) tax credits for a product that has already been developed. But to do so, the details of how the original was developed must not be publicly available or readily deducible. If these details are withheld as a trade secret, then you could potentially still claim R&D tax credits for your own solution.

R&D takes place when a company seeks to make an advance in science or technology. Whatever size or sector, if your company is taking a risk by attempting to ‘resolve scientific or technological uncertainty’ then you may be carrying out qualifying R&D activity. This could include creating new products, processes or services, but also changing or modifying an existing product, process or service in order to make it better.

How similar products can both qualify for R&D tax credits

If the details of how the existing product are not readily available, work on developing your own solution can qualify for R&D tax credits – as long as you were:

  • seeking an advance in science or technology; and,
  • facing scientific or technological uncertainty.

There are two examples where this might be the case:

  1. An existing solution is someone else’s trade secret and information about how the original was created is not available to you.
  2. Develop an existing solution with the same performance standards in a fundamentally different way.

In an alternative scenario, a product which has the same performance characteristics as an existing solution can still be eligible for R&D tax credits if you have achieved it in a fundamentally different way.

Does this count as R&D?

Routine analysis, out-and-out copying or adaptation of the existing product will not have sought an advance in science or technology. These activities will therefore not count as R&D and should not be included in your claim. This is a question our team get asked a lot.

Determining what counts as R&D, and what does not, is not always straightforward. Our team of qualified chartered tax advisers and sector specialists are expert and always happy to help. With our specialist technical firepower on your side, you can be confident your claim is fully maximised and protected from risk.

At ForrestBrown, R&D tax credits is all we do. Our team is made up of chartered tax advisers, sector specialists, lawyers and ex-HMRC inspectors. This means that we are perfectly placed to assess the extent to which your project costs qualify, and optimise the value of your claim.

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This article was last updated on 7 May 2019.

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