What is a competent professional in relation to R&D claims and what are their responsibilities?

A competent professional (CP) is the person within your business who assesses which of your business activities count as R&D. All R&D tax relief claims must include certain judgments made by someone regarded as a competent professional working in the field.

Examples of these judgments include:

• whether or not a solution is “readily deducible” (paragraph 20 of the DSIT Guidelines)
• what uncertainties can be “readily resolved” (paragraph 14 of the Guidelines)
• what might be a “genuine and non-trivial improvement” (paragraph 23 of the Guidelines)

In short, without a CP, there can be no R&D claim.

Identifying the competent professional

Before even starting to make a claim, a company should identify who the CP is. Sometimes this is a simple task. There might only be one person working on a particular R&D project, so they will be the CP. For software projects, this may be a developer; or, in a manufacturing business it might be an engineer.

But many R&D projects involve a lot of people and multiple disciplines, meaning that there might be several CPs making judgments on a project. In these scenarios, a project manager may be the obvious point of contact if they have a complete overview of the project. They might not be a CP from a tax perspective, but they should be able to identify the relevant staff members with the experience to make the assessments on whether the projects qualify as R&D under the DSIT Guidelines.

A company should look at each of its projects and ask the CP(s) what was easy, what was hard and what was in between. Of course, these are not what determine the existence of an R&D project, but it is a good starting point. It allows you to exclude projects that are clearly not R&D, allowing closer consideration of the others.

From there, armed with knowledge of the requirements laid out in the Guidelines, the CP can start deciding the following:

• what is and is not readily deducible;
• which parts involve the resolution of scientific or technological uncertainty;
• when such resolution starts; and
• when it was resolved (if applicable) to the extent that it was in a form usable by a CP.

If all this can be done in “real time” at the onset of an R&D project then all the better, since keeping contemporaneous records will be far easier.

How is the competent professional defined?

The obvious question then is “what is a competent professional working in the field?” There is no definition in the Guidelines, so the term must be taken at its natural meaning.

HMRC’s view can be found in Part 3 of Guidelines for Compliance (GfC) – Importance of a Competent Professional, and this should be a “must read” for any CP so that they can confirm what their role is in the process. It is expected that the CP will:

• Be knowledgeable about the relevant scientific or technological principles
• Be aware of the current state of knowledge in the field as a whole
• Have accumulated experience and have a track record.

Although the additional information form (AIF) – the document which is submitted to HMRC to confirm the R&D costs and projects within a claim – does not require biographical details of the competent professional, such details (without documentary support) could usefully be supplied with the claim to help HMRC understand that the CP is qualified to make the required judgments. Even if they are not supplied, it is important to be able to evidence these, should HMRC make a compliance check. This might include confirmation of relevant qualifications, experience, being published, awards received and/or other public recognition.

Usually, the CP will be a direct employee of the company claiming, though it is also possible for them to be a subcontractor or externally provided worker. Whatever their status, they must be involved in the making of the claim. This means determining the required advance and uncertainty as well as determining the quantum of the claim. This is because it will be the CP who knows who worked on what and for how long, and which parts of that went towards resolving the relevant scientific or technological uncertainties.

It’s also important to ensure that the CP’s background, experience or qualifications in a relevant field of science or technology are within the same field that the R&D claimed is undertaken in. A physicist is unlikely to be a CP in biochemistry, but engineers in one sector might, for example, seek to be a CP in another.

Judicial guidance on the competent professional

The issue of CPs has been considered by the Tribunal in several cases. One often quoted by HMRC is AHK Recruitment Ltd v HMRC [2024] UKFTT 232 (TC). In that case there was no CP put forward to give evidence, and so the Tribunal found it easy to conclude that there was no R&D. The Tribunal did however say what sort of evidence would have been useful:

“evidence from someone who was contemporaneously involved in the project and activities underpinning the claim for R&D relief and/or had direct knowledge of the detail of those activities or, at the very least, from someone who (even if not contemporaneously involved in the project) was a competent professional in the field or otherwise had expertise such that he/she could state with authority what technology was readily available during the relevant period and how the technology that the Appellant sought to develop was materially different to or appreciably improved from that which was readily available.”

It is a wide-ranging statement, in effect saying what they most needed was evidence from someone who could say what technology was available at the time (often referred to as the ‘baseline’ by HMRC) and how what the company sought to do was materially different to, or appreciably different from, that baseline (in effect, this is the advance). It follows that if a company has evidence from someone to whom the above quote would apply, then the result in this case – no R&D – would not support any similar argument put forward by HMRC.

Further useful guidance can be found in Get Onbord Ltd v HMRC [2024] UKFTT 617 (TC).

The CP in that case was not a software developer, but could write code. He had no formal qualifications either. Despite this, the Tribunal had no problem in finding him to be a CP since he was a “very impressive witness, who spoke with complete fluency about the technical way” in which the project worked. They also found he had “experience (including in coding) and up-to-date knowledge of software capabilities, albeit perhaps only in the area he works in, to be a ‘competent professional’ for our purposes.”

Just because something might be readily deducible to one CP does not mean it is readily deducible to all CPs. If such an argument were taken to the extreme, then R&D could only be undertaken by the most well qualified person in each of the fields of science or technology. Indeed, HMRC’s GfC guidance says:

“There may be differences of opinion between competent professionals in a particular field. Where the view taken is a legitimate one, reached by a competent professional properly exercising expert judgement, then it would normally be acceptable.”

Seek specialist support

The issue of CPs can be a minefield with many nuances involved, so consulting with a specialist adviser such as ForrestBrown can prove invaluable. Our multi-disciplinary team includes sector specialists drawn from a range of industries, who can liaise with your competent professional using industry-specific language. We also monitor Tribunal judgments and industry guidance to ensure that you’re up to speed with all the latest information on CPs.