If you’re confident that your business and R&D may be eligible for the RDTI, click here if you're ready to prepare your application. If you’re unsure, read on to find out more.
How do I know if my R&D is eligible?
R&D can mean different things in different contexts. For example, the business, accounting and scientific worlds all have specific definitions of what R&D means.
The RDTI is about encouraging R&D that pushes beyond existing scientific and technological barriers, and does this in a way that’s both systematic and with a specific goal in mind.
There are five “tests” we apply to see if your R&D meets these criteria.
The first three tests are about the unique nature of your R&D, and the last two tests are about the approach you’re taking and the goal you’re aiming for.
If you answer “yes” to the five tests below, there’s a good chance your R&D is eligible for the RDTI.
To be eligible for the RDTI, you must be doing more than just developing a new product, service or knowledge. You must be trying to overcome a particular scientific or technological problem that you’re not even sure can be resolved.
The RDTI calls this “scientific or technological uncertainty”, and being able to identify and describe it is the basis on which RDTI eligibility rests.
Find out more about scientific or technological uncertainty.
This test (and the next one) are about confirming that your problem meets the test for scientific or technological uncertainty.
Because the RDTI aims to support novel R&D, it’s important to establish whether knowledge about how to solve your uncertainty is publicly available.
If a solution is freely available from sources such as the internet or relevant journals, or it can be purchased on reasonable terms under an existing patent, then your problem isn’t a scientific or technological uncertainty in the context of the RDTI. But if no solution can be found or the terms of access are financially prohibitive, then you’re likely to pass the first part of the uncertainty test.
Find out more about the publicly available information test.
The next test to see if your problem meets the scientific/technological uncertainty criteria is to ask whether a competent professional in the relevant field could come up with a solution, without undertaking a systematic course of investigation. If they can’t, then your R&D is likely to pass this test.
A competent professional is someone with appropriate skills, experience and knowledge. They needn’t be a world-leading expert, and it’s likely you will have suitably qualified people on your own staff.
Find out more about the competent professional test.
The RDTI’s aim is to encourage investment in R&D, and not simply reward accidental discoveries that could occur without any actual R&D investment. So, it’s important that there’s a systematic approach underpinning your R&D. In other words, you’re carrying out a logical investigation towards solving your challenge, e.g. through testing, experimentation or prototyping. Your approach can be flexible and adaptive, changing in response to results, so long as it remains logical and focused on solving the uncertainty.
Find out more about what is a systematic approach.
This test is also intended to ensure that the RDTI doesn’t simply reward accidental discoveries, that could occur without any purposeful R&D investment. So you need to be able to show that your R&D is aimed at a specific outcome, and articulate what this is.
Find out more about what we mean by new knowledge, or new or improved processes, services or goods.
Are you confident that your R&D may meet the criteria? Great! Now you might like to find out what aspects of your R&D project you can claim costs for.
What R&D activities can I claim for?
The RDTI lets you claim expenditure for a wide range of activities, provided they’re intrinsically related to the work you’re doing to resolve the uncertainty at the heart of your R&D.
The activities you can claim for fall into two broad groups - what the RDTI calls ‘core R&D activities’ and ‘supporting activities’.
If you answered “yes” to the five criteria above, it’s highly likely you will have at least one core R&D activity - and probably many supporting activities too!
As its name suggests, core R&D activity forms the basis of the work you’re doing towards resolving the scientific or technological challenge at the heart of your R&D project.
Find out more about core R&D activity.
Supporting activities aren’t core R&D, but support the core R&D you’re doing. If you have a core R&D activity, you will probably have a number of supporting activities you can claim for too.
Find out more about supporting activities.
There are some activities that aren’t eligible for the RDTI. A particular activity may be excluded as a core R&D activity but eligible as a supporting activity, while others are excluded as both core R&D and supporting activities. Find out more about excluded activities.
Structuring and naming your project
A project in the context of the RDTI is simply a group of eligible activities.
The way you group eligible activities on your application doesn't need to mirror the structure of an actual, real-world project.
Find out more about what is a project.
Identifying eligible R&D within a commercial project or environment
We recognise that the RDTI definition of R&D may not be identical to what your business perceives is R&D.
Similarly, the way the RDTI categorises R&D into ‘core R&D and supporting activities’ may not match how you’re actually going about conducting your R&D.
However, it’s important that you can describe your R&D within these conceptual frameworks, to show that it meets the RDTI eligibility criteria set out in legislation.
Here’s some guidance to help you do this.
As a business, it’s natural to describe R&D in commercial terms.
Although commercial information can provide useful context to your RDTI application, it’s not essential. It’s more important to focus on the scientific/technological aspects of your R&D.
Find out more about getting to the core of your R&D project.
Once you've concentrated your focus on the scientific or technological aspects at the core of your commercial project or activity, the next step is to apply the five tests. By looking at what you're doing through the ‘lens’ of these tests, you will start to see how to frame your project/activity in a way that reflects the RDTI eligibility criteria.
Find out more about applying the five tests.
A commercial R&D project or environment will likely involve a mix of:
- eligible core R&D activities
- eligible supporting activities
- ineligible activities.
Find out more about how to identify these different types of activity in a real-world setting.
The RDTI has been designed so that it’s generally applicable to any sector.
There are some special conditions that apply to R&D performed in specific sectors, such as the digital technology sector.
We’re also developing a range of support to show how the RDTI is applicable to specific sectors. Find out more below.
Note that the following special rules apply to software development:
- software development for the purpose of internal administration of a business is ineligible for the RDTI
- software development for non-administrative internal purposes is eligible for the RDTI, but subject to a $25 million cap
- software developed for the main purpose of sale or as an integral part of goods that are sold (external software development), is not subject to the $25 million cap.
For more information on how the RDTI applies to digital technology sector R&D, check out Inland Revenue’s Digital Technology Sector Guidelines.
Check out the following example of a completed General Approval application:
Check out the following examples of completed General Approval applications:
Check out the following example of a completed General Approval application:
I'm ready to prepare my application
If you are feeling confident that your R&D is eligible, go to How do I apply?
Remember, we provide free tailored support
Unless you’ve done this before, and are really confident, we can connect you with a Customer Engagement Specialist to support you with your application. This is a free service.
The Customer Engagement Specialist can meet with you to help you work out if your R&D may be eligible, discuss how to structure your application and provide feedback on your drafts. And by using our application template, you'll be able to get your application into a format that makes it easy to submit on myIR.
Note however that any discussion about the RDTI with our Customer Engagement Specialists will not be binding. The final decision will be based on the recommendation of an independent assessor at Callaghan Innovation, following due consideration of eligibility criteria set out in legislation.