Understanding Technological Uncertainty for RDEC

This article explains:

• What HMRC means by technological uncertainty

• Why it’s so difficult to identify correctly

• Why it’s not the same as describing functionality

• How to identify the right uncertainties

• Practical examples

• Key mistakes to avoid

What HMRC Means by “Technological Uncertainty”

Under the RDEC scheme, a project involves qualifying R&D if it seeks to achieve an advance in science or technology and, in doing so, faces technological uncertainties that competent professionals cannot readily resolve.

A technological uncertainty exists when:

• How to achieve the advance is not readily deducible or publicly available knowledge

• A competent professional cannot easily work out how to achieve the desired outcome

• There is genuine uncertainty over whether something is possible, or how to make it work in practice.

Why Businesses Struggle to Identify Technological Uncertainty

There are several common reasons why companies find this hard:

1. Teams are too close to the work

What felt uncertain at the time can look “obvious” in hindsight – especially once a solution exists.

2. Confusion between difficulty and uncertainty

Something being hard, time-consuming, or expensive does not automatically mean it was technologically uncertain.

3. Over-focus on outputs

Many claims describe what the system does, rather than what couldn’t be done at the start.

4. Commercial and delivery challenges get mixed in

Deadlines, budgets, integration with clients, or performance targets are not technological uncertainties.

Technological Uncertainty vs Functionality: A Crucial Distinction

This is one of the most common reasons HMRC challenges claims.

• Functionality describes what the product or process does.

• Technological uncertainty explains why achieving that was not straightforward.

For example:

• ❌ “We developed a platform that processes data in real time.”

• ✅ “At the outset, it was uncertain whether real-time processing could be achieved at scale without unacceptable latency, given existing architectural constraints.”

HMRC is not interested in features. They are interested in:

• What was unknown

• Why existing knowledge was insufficient

• What had to be experimented with or tested

How to Identify the Key Technological Uncertainties

A useful way to uncover genuine uncertainties is to ask:

1. What specifically was not known at the start? Not “it was complex”, but what was unknown?. This has to be at an industry level, rather than your own company’s knowledge.

2. Could a competent professional readily solve this using existing knowledge?
   If yes, it is unlikely to qualify as R&D.

3. Was there uncertainty over feasibility, method, or outcome?
   HMRC accepts uncertainty in:

   • Whether something would work at all

   • How to achieve something in practice

   • Which of several approaches might succeed best

4. Did the team have to test, prototype, model or experiment to resolve unknowns?
   This is often where qualifying R&D activity sits.

Practical Examples of Technological Uncertainty

Example 1: Software Development

• ❌ “Building a scalable system”

• ✅ “It was uncertain whether the chosen architecture could support concurrent processing at the required scale without data integrity issues.”

Example 2: Manufacturing

• ❌ “Improving production efficiency through new material formulation”

• ✅ “It was uncertain whether the new material formulation could withstand high-temperature processing without structural failure.”

Example 3: Engineering / Construction

• ❌ “Designing a more efficient low-carbon structure”

• ✅ “There was uncertainty over whether the proposed structural design could meet load-bearing requirements using the specified low-carbon materials.”

Other Key Points HMRC Cares About

• Baseline matters: What was already known before the project began?

• Uncertainty must be technological: Commercial, regulatory or market uncertainty does not qualify.

• Not everything in a project qualifies: Only the work directly related to resolving the uncertainty is R&D.

• Clear linkage to costs: The identified uncertainties should align with the activities and costs being claimed.

Why Getting This Right Matters

HMRC scrutiny of RDEC claims has increased significantly. Clear identification of technological uncertainty:

• Reduces enquiry risk

• Strengthens compliance

• Makes claims easier to defend

• Improves credibility with HMRC

A strong RDEC claim does not exaggerate innovation – it clearly explains what was unknown and why it mattered.

Need more information?

Visit Claiming RDEC Index Page for detailed guidance on many aspects of claiming Research & Development Expenditure Credits.