The accounting and science tests
When claiming the R&D tax credit, a company must be in a position to demonstrate that its claim can satisfy two essential tests, the accounting test and the science test, with records being maintained to satisfy both.
- The accounting test ensures the expenditure included in the claim relates to the R&D activities and is correctly claimed. The company must maintain a record of the expenditure incurred in the carrying on of the R&D activities for which it is claiming.
- The science test ensures the activities included in the claim are consistent with the statutory definition of R&D. The science test examines whether or not an activity:
- is systematic, investigative, or experimental in nature;
- is carried out in a Revenue approved field of science and technology;
- is basic research, applied research or experimental development;
- seeks to achieve scientific or technological advancement; and
- involves the resolution of scientific or technological uncertainty.
It should be noted that there is no specific requirement for an R&D activity to successfully meet its objectives in order to qualify for the R&D tax credit.