HMRC publishes new guidance on R&D claims for the production of goods and services

John Moore, March 19th, 2012

This news item is an update on our earlier article on this subject on 12 August 2011.The basic position is that the activities of production and distribution of goods and services are not R&D. HMRC’s published guidance in this area has prevented claims for costs of consumables items involved in production trials, prototypes and manufacture of “first of class items” where there was any intention of selling the output of the trial, prototype or first in class asset. Recently however HMRC have been prepared to accept claims in this area providing that basic principles were adhered to, with the expenditure on activities that contribute to an advance in science or technology, as well as producing goods or services for supply to a customer being capable of being part of an R&D project in the right circumstances.

HMRC have now updated their guidance which sets out this principles based approach. The new guidance is welcomed and companies whose R&D activities include production trials, prototypes or first in class projects should review their R&D claim methodology to ensure that they are claiming the right amounts.

Our View

Kingly Brookes has been closely involved in the feedback to HMRC on the formulation of this guidance prior to publication and we welcome the clarification of the guidance and practice in this complicated area of the legislation.

If you would like to discuss the application of this, or any other aspect of the R&D tax relief to your company  then please do not hesitate to contact John Moore on 0207 292 8850 or at

This briefing is prepared by Kingly Brookes LLP, a limited liability partnership. For further information on any of the material contained in or referred to in the briefing, please contact us. This briefing note is intended to keep our readers up to date with the developments in this area, but it is a general guide only and is not intended to be a comprehensive statement of the law and practice in this area. No liability is accepted for the opinions it contains or for any errors or omissions.