‘Non-readily deducible by a competent professional’ is a key element of all R&D tax claims, but what does it mean?

Date: August 4, 2022

Essentially, a competent professional is someone who has acquired sufficient skills, knowledge, education and experience to be recognised as an ‘expert in the field’. This does not necessarily mean that they went to university and have a doctorate degree, rather, it means that they have worked in the industry for several years and have built up a body of knowledge that can lend itself to the nature of the R&D projects.

The specific nature of the R&D projects is particularly important and relevant to selecting a competent professional to speak with in order to qualify activity, and more importantly, highlight to HMRC in the event of an enquiry. Often times, we speak to an individual who is highly educated, but not in the field that the R&D project sits – this means that they are not a competent professional in the field in which R&D takes place, which can cast doubt on the validity of the qualifying R&D activity.

For example, mechanical and electrical engineers who have gone to university, completed a master’s degree or doctorate and worked in the industry for 30 years are highly, highly competent professionals in the mechanical and/or electrical fields. However, this background, skills, education and knowledge does not always lend itself to software development. If the project is seeking an advance in the software industry, the competent professional needs to be educated (through formal education or experience) within the software industry. Although the mechanical and electrical engineers are extremely knowledgeable and highly educated, their ability to develop software to the point that it can equate to an advancement within that industry is questionable.

This leads nicely to the phrase ‘non-readily deducible by a competent professional’ that is seen across all R&D claims. What this means is, the issue at hand (namely, the technological uncertainties) cannot be easily solved by the individual that has the aforementioned background, skills, knowledge and education to get the project over the line. We need to find a competent professional that can state that to the best of their knowledge of the industry, this isn’t something that can be resolved without specific and dedicated research and development.

The key here is we look at the industry and field, not just a company’s own state of knowledge. In looking at project specific or site-specific issues (in construction / architecture cases), what we need to assess is whether this site issue can be resolved by a competent professional in the field. Could a drainage engineer, a foundations expert or a civil engineer look at the project and readily find a solution? If so, this means that the how-to knowledge exists within the industry and is therefore readily deducible – even if the project lead has worked in construction for 25 years and has never come across this issue on a project.  What is key is that the specific knowledge surrounding how to complete a project exists, rather than the solution is not known by the project lead.

What is important here is two things:

1. We need a competent professional in the field of science or technology in which the R&D falls present at every consultation in order to adequately determine the baseline from which we can quantify an advancement in the industry. Without this knowledge, we cannot proceed.

2. It is the competent professional’s opinion which we use to determine if the resolution of the uncertainties was in fact non-readily deducible.  It may be that the how-to knowledge is regarded as a trade secret and not shared amongst industry professionals, and in these cases, we will determine if the individual we are speaking with truly is a competent professional in that specific field. In doing so, we can establish the baseline technology and scientific/technological advancement for corporation tax purposes.

Without a competent professional, we don’t have an R&D claim. One way to expedite a claim for your client(s) is to ensure that a competent professional in the field in which the R&D project works in is present at the consultation with a dedicated Specialist Tax Consultant. That way, we can establish the baseline, advancement and technological uncertainties right from the source and progress your claim much faster, with a high degree of accuracy and specificity.

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