If your business has worked on a machine learning project and it was a success, you might assume that the next step is to claim R&D tax relief on your project costs. While this may be possible, just because you were working on a high-tech project does not guarantee that R&D relief will be available.
Qualifying expenditure for R&D: The basics
Although Machine Learning may be cutting edge technology, it is wrong to assume that a new outcome, or applications incorporating Machine Learning techniques are by default considered as R&D qualifying activities. HMRC has never been interested in the outcome of R&D - as we know, failed projects may also qualify. Instead, they will look at the basic definition of R&D to confirm whether any project qualifies. In order to qualify, a company must be undertaking a project:
- That seeks to achieve an advance in science or technology and
- The activities of which directly contribute to achieving this advance in science or technology through the resolution of scientific or technological uncertainty.
Could your claim be challenged?
In our experience of assisting companies resolve HMRC R&D enquiries, the original technical case studies submitted in support of a machine learning R&D claim illustrate how the project focused on the fine tuning and optimisation of open-source libraries such as NumPy, TensorFlow, Matplotlib and others. But if the claim does not explain whether the aim of the project was to fundamentally alter or enhance such libraries, the use of existing libraries will not justify an advance in science or technology in the field.
Many case studies also focus specifically on the core application of libraries, and the complexity of sourcing data from one or many sources, or the segregation, categorisation, and filtration exercises required to feed data appropriately into the algorithms. Limitations in available literature and the non-functional requirements can be overlooked so that the core problem- the one that the project intended to solve – is not described clearly in the case study. If HMRC cannot understand the core problem, they may well challenge whether or not R&D has taken place to resolve it.
Pure Mathematics
R&D work in the field of Pure Mathematics can potentially qualify for relief as of 1 April 2023 onwards. Helpfully, the definition of pure maths within the new legislation allows ‘improved modelling accuracy’ to qualify as a form of scientific advancement in its own right, even without the need to appreciably enhance the technology running the models (for example, the python libraries carrying out certain analytics). Read more on pure mathematics R&D.
How we can help you make the right R&D claims
We have a wide range of technology experts who are also R&D specialists. Our team will take the time to understand your projects at a technical level and apply forensic skills to help identify which elements of your project were intended to lead to an advance in the technology. This level of understanding allows us to prepare your claim and assemble all aspects of the technological information required to show that technological boundaries were being pushed by your project team.
We have extensive experience in helping financial services and BigData Science, Machine Learning and AI technologies. For help and advice on your current R&D claims, please contact Carrie Rutland or Ravi Prajapati.
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