Companies wishing to claim R&D tax relief on production activities (undertaken with a view to producing goods or services for supply to customers) such as prototypes or consumables that are eventually commercialised or sold should be aware that following consultation, HMRC has now produced new guidance on which activities can qualify available here at CIRD 81350
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According to the new guidance, production activities can qualify under certain conditions and each claim will be looked at on its own merits.
The key questions to consider are whether there is real, quantifiable and significant scientific or technological uncertainty about the successful outcome of the activity at that point in the process, and does the activity seek to resolve that uncertainty.
HMRC expect uncertainty to generally tail off during a trial but this may not always be the case.
'First in Class' projects (very expensive projects such as a battleship or a plant that as well as being experimental will ultimately sold commercially to a customer) will require analysis of the individual R&D projects that may occur within the wider commercial project. It is also important to consider whether the R&D may be subcontracted in such cases, which could affect a claim.
This is a complex area and if you are in doubt as to whether or not your activities are likely to qualify, then please contact us.