What do HMRC mean by the term ‘Competent Professional’?

What do HMRC mean by the term ‘Competent Professional’?

In overview terms, HMRC define compliant R&D for tax purposes as;

‘the seeking of an advancement in science or technology by overcoming scientific or technological uncertainty which is neither publicly available nor readily deducible by a competent professional working in the field’

The term ‘competent professional’ is not defined further within the legislation itself as the term itself is considered to be ‘self-explanatory and therefore takes on a more generic meaning as outlined in CIRD81300.

The individual deemed by the claimant to be the ‘competent professional’ should be able to demonstrate a sufficient level of skill and knowledge of the field, to be able to work in it successfully.

This is especially important when it comes to assessing compliant activities for R&D Tax Credits purposes, as the ‘competent professional’ is usually the best placed individual to assess whether a project qualifies, based on their knowledge, skill, academic background and experience of whether the activity was an advancement in the field of science and technology, or simply a routine fix.

The benchmark is therefore not necessarily the view of an ‘expert’ or a ‘leader’ and, for this reason, it’s important to recognize that the Managing Director, CEO and suchlike is often NOT the competent professional, despite their protestations, especially in larger SME’s.

It is also important to note that the degree of skill and knowledge demonstrated by the competent professional must be within the field as a whole and may extend considerably beyond the limitations of the claimant company.

It would be reasonable to expect the competent professional to exhibit the following characteristics;

  • specific sector experience which gives him/her the knowledge of the baseline regarding thescientific and technological principles in the field at the time the activities were undertaken
  • a track record of achievement within the field which supports their competence
  • an up-to-date awareness of the scientific and technological aspects of the field in which they operate, in the same way that professional bodies actively encourage the deployment of CPD initiatives
  • an ability to explain and convey details of any developments (which may be highly technical in reality) in a simple and concise manner which is easily understood by a layperson.

At Innovation Tax, we firmly believe that early identification of the competent professional is of vital importance in providing the required level of assurity and robustness to the technical compliance of a claim.

Technical R&D reports we prepare on behalf of our clients include a profile on the Competent Professional outlining the following summary points:

  • employment and academic history including tenure at claimant company
  • technical experience and skills in relation to the development being undertaken

This helps put into perspective the role they play as the ‘competent professional’, aside from their more obvious day-to-day commercial activities based upon the position hold.

Innovation Tax specialise in helping companies access vital funding and tax incentives to enable their businesses to grow, increase profitability, reduce risk and enable further investment in R&D and capital investments.

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