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

by Anna Walton

It is still possible to claim research and development (R&D) tax credits for a product that has already been produced or attempted. The details of how the original was achieved 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 is defined as seeking 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’.

When determining if you have sought an advance in science or technology in your project, routine analysis, copying or adaptation of the existing product will not qualify for R&D tax credits.

How products which are copies of existing solutions can 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:

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

This might occur where an existing solution is someone else’s trade secret, so the information regarding how the original was created is not available to you.

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.

Extending knowledge in your field of science or technology

The advance being sought must mark an extension of the overall level of knowledge and/or capability in your field of science or technology – not just your own knowledge. But this overall extension can still be valid if the details of comparable solutions are neither readily available or deducible by a competent technical professional.

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

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This article was last updated on 13 November 2018.

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