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This page sets out what activities are eligible for a research and development (R&D) loss tax credit. It also shows those activities that are not eligible for the tax credit.

Your research and development (R&D) should be a study to gain new knowledge of a scientific or technical nature. This can result in new or large improvements to materials, products, devices, processes or services.

Research activities

Your research must:

  • be original
  • involve a planned investigation.

Planned investigations should be about gaining new scientific or technical knowledge and understanding. 


Original is defined as being new. That is, not already available publicly or commercially. This also covers research and development to create something new for your company.


Planned is defined as a proposed strategy for a future goal. There should be a stated end result and a structured approach for achieving this.


Investigation is defined as a series of processes with clear steps to gain new knowledge.

New knowledge

New knowledge refers to a new theoretical or practical understanding of a subject. For example, knowledge that was unknown before and not expected.


Development uses research findings to produce new, innovative or substantially improved:

  • materials
  • devices
  • products
  • processes
  • systems
  • services.  

Substantial improvement

Substantial improvement has a high threshold. It is more than just an improvement and should be easily recognised. There should be an identifiable amount of originality and innovation.


This is the way to tell if your project is R&D. It separates your project from business-as-usual activities.

Development activities excluded for the R&D loss tax credit 

There are development activities excluded for the purposes of the R&D loss tax credit.

  • Activities that happen before commercial production. These also known as pre-production activities. For example, tooling-up, trial runs, production planning, and start-up procedures.
  • Activities that have moved into commercial production.
  • Activities that seek to duplicate work already developed by others. These are not R&D unless you can show that the knowledge is not available to the company, for example, a trade secret.
  • Activities that reproduce existing product or process, for example, reverse engineering. 
Examples of areas considered to be R&D

The following are examples of what may be considered R&D and must meet the definition for the R&D loss tax credit: 

  • A deliberate search for new knowledge, intellectual property and know-how.
  • A clearly defined project with separate and identifiable costs.
  • Results written up as part of a knowledge capture during or at the end of an R&D project.
  • Freedom to Operate (FTO) search and analysis as part of planning and scoping the R&D project. FTO is required when determining whether valid intellectual property rights exist, or will be infringed.


  • Application programme interfacing where unknown programme interactions require new technical solutions.
  • Complex data capture and analysis requiring new technical solutions.

Examples of areas considered not to be R&D

The following are examples of some areas that aren't considered R&D for the purposes of the R&D loss tax credit:

  • Exploring if something is already known compared to gaining new knowledge.
  • Reverse engineering or copying compared to substantially improving something.
  • Routine design of tools, jigs, moulds and dies, seasonal or other periodic design changes to existing products.
  • Adapting an existing product or process to a particular customer's need or site. 
  • Drafting documents to publish or communicate research results. 
  • Work to implement or comply with international quality management systems, for example, ISO 9001.
  • Clinical trials beyond Phase II.


  • Supporting, de-bugging or making minor improvements to existing computer software.
  • Business support systems or infrastructure development, for example, a database built to manage the company's research projects.
  • Business-as-usual software development without noticeable innovation. 
  • Database creation.
  • Improvements to existing software and systems. 
  • Cross-platform development and programming.
  • User interface design, dashboard creation, front-end functionality design and development. 
  • Automated data capture and analysis.
  • Adding modules to existing software unless it can be show that something is significantly different to what is already available. 
  • Development of industry standard products not noticeably different from what is currently available.

Last updated: 28 Apr 2021
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