Module 1: Legislation and guidance

After this module you will be able to locate the operative definition of R&D in each of the seven countries, separate what the statute requires from what the guidance explains, and write a legislation note for a client file that states, with citations, which words a project has to satisfy.

What this module covers

Statute and guidance: what each layer does.
The seven definitions side by side, in the words that hold them.
Four differences that change the analysis.
Keeping a legislation file current.

Statute and guidance are different documents

Each scheme defines R&D in legislation or regulations, and each has official guidance from the tax authority or administering department. The statute states the test and, in most countries, lists excluded activities. The guidance explains how the authority reads the test: what it understands by uncertainty and a systematic approach, who it treats as a competent professional, and what it regards as routine. Australia and New Zealand add a third layer, because activities are registered or approved against the definition before any claim is made. Cite the statute for the test and the guidance for the interpretation, and keep them apart in the file. Where the guidance seems narrower than the statute, write the claim to satisfy both. Read in a fixed order: definition, exclusions, guidance on the key terms, then the form fields.

The seven definitions side by side

Country	Where the definition sits	The definition	Guidance applied
United States	Section 41 of the Internal Revenue Code; Treasury Regulation 1.41-4	Research qualifies only if it passes all four parts of the test in section 41(d). The costs must be eligible to be treated as research or experimental expenditure under section 174. The work must be undertaken to discover information that is technological in nature. That information must be intended to be useful in developing a new or improved business component. And substantially all of the activities must be elements of a process of experimentation.	IRS Instructions for Form 6765; IRS Research Credit Audit Techniques Guide
United Kingdom	The government's guidelines on the meaning of R&D for tax purposes, which HMRC applies	A project qualifies if it seeks an advance in science or technology by resolving scientific or technological uncertainty.	DSIT Guidelines on the meaning of research and development for tax purposes; HMRC CIRD manual
Ireland	Taxes Consolidation Act 1997, section 766; Prescribed Research and Development Activities Regulations 2004 (S.I. No. 434 of 2004)	Qualifying R&D activities are systematic, investigative or experimental activities in a field of science or technology. They must be basic research, applied research or experimental development, must seek to achieve scientific or technological advancement, and must involve the resolution of scientific or technological uncertainty.	Revenue Tax and Duty Manual Part 29-02-03
Canada	Income Tax Act, subsection 248(1), definition of scientific research and experimental development	SR&ED is systematic investigation or search carried out in a field of science or technology by means of experiment or analysis. It covers basic research, applied research and experimental development, and support work that directly supports them.	CRA Guidelines on the eligibility of work for SR&ED tax incentives
Australia	Income Tax Assessment Act 1997, Division 355; registration under the Industry Research and Development Act 1986	Core R&D activities are experimental activities whose outcome cannot be known in advance from current knowledge. They follow a systematic progression of work, from hypothesis to experiment, observation and evaluation, leading to logical conclusions, and are conducted to generate new knowledge. Supporting R&D activities are directly related to a core activity, and some must also be undertaken for the dominant purpose of supporting it.	DISR Guide to Interpretation
New Zealand	Income Tax Act 2007, subpart LY; schedule 21 lists the excluded activities	An R&D activity is a core activity or a supporting activity. A core activity uses a systematic approach to create new knowledge or new or improved processes, services or goods, and to resolve scientific or technological uncertainty. A supporting activity must be required for and integral to a core activity.	Inland Revenue, Research and development tax incentive guidance
Singapore	Income Tax Act 1947, section 2 (definition of research and development), sections 14C and 14D	R&D means systematic, investigative and experimental study that involves novelty or technical risk, carried out in the field of science or technology to acquire new knowledge, or to use the results to produce or improve materials, devices, products, produce or processes.	IRAS e-Tax Guide: Research and Development Tax Measures; IRAS e-Tax Guide: Enterprise Innovation Scheme

Where the definitions differ

The unit of analysis

In the United States the unit is the individual product, process, technique, formula, invention or piece of software, tested first as a whole and then by successively smaller subsets of its elements. The United Kingdom and Ireland test a project. Canada describes work by project but defines eligible work by what was done and why. Australia and New Zealand test individual activities. Singapore tests a study against three requirements.

The test of uncertainty

Four schemes name a competent professional. In the United Kingdom, uncertainty exists when knowledge of whether something is scientifically possible or technologically feasible, or how to achieve it in practice, is not readily available or readily deducible by a competent professional working in the field; Ireland, New Zealand and Singapore ask what a competent professional could readily resolve, deduce or know in advance from current knowledge. The United States judges uncertainty before the work starts, about capability, method or appropriate design; Australia asks whether the outcome could be known in advance from current knowledge, information or experience; Canada asks whether it could be resolved by standard practice.

The exclusions

Five schemes carry a statutory list of excluded activities: the United States, Canada, Australia, New Zealand and Singapore. Ireland's exclusions are in regulations. The United Kingdom guidelines instead state that activities such as market research, cosmetic and aesthetic design, and commercial and financial work do not form part of R&D unless they directly contribute to resolving the uncertainty.

Supporting work

Canada admits work commensurate with the needs and directly in support of the eligible work. Australia admits activities directly related to the experimental activity, some only where undertaken for the dominant purpose of supporting it. New Zealand requires the activity to be required for and integral to the experimental activity. The United Kingdom guidelines list qualifying indirect activities.

Keeping the legislation file current

Rules attach to periods. The United Kingdom's current rules apply to accounting periods beginning on or after 1 April 2024; Ireland's 35% rate applies where the corporation tax return filing date is on or after 23 September 2027; Canada's C$6 million expenditure limit applies for tax years beginning after 15 December 2024; Singapore's 400% deduction runs from YA 2024 to YA 2028. Record for every client the period, the rule, the guidance consulted and the date checked. Label announced measures separately: Australia's 2026-27 Budget measures, proposed from 1 July 2028, are proposed and not yet law, and the current rules apply until then.

Illustrative example

Illustrative example. Harbour Robotics Ltd, a hypothetical company, spends 100,000 in a year on a project to make a robotic gripper hold irregular soft objects without damaging them. Its advisor writes a legislation note. Claiming in the United Kingdom, the note states that the project must seek an advance in science or technology by resolving scientific or technological uncertainty, judged against a competent professional working in the field. Claiming in Australia, it states that each experimental activity must have an outcome that cannot be known in advance from current knowledge, following a systematic progression of work from hypothesis to experiment, observation and evaluation, registered with the department within 10 months of the end of the income year. If the project passes Module 2, the benefit is calculated at that country's rate.

Across the seven countries

Country	What to read first
United States	Four-part test in section 41(d), applied to each business component; failing any part means the activity does not qualify.
United Kingdom	An advance means an advance in overall knowledge or capability in a field, not a company's own state of knowledge or capability alone.
Ireland	The manual sets out a science test and an accounting test; the Regulations prescribe the fields of science and list the excluded activities.
Canada	The guidelines ask two questions: why was the work done, and how was it done.
Australia	Core and supporting activities are defined separately; a registration must include at least one core R&D activity.
New Zealand	Approval comes before the claim; schedule 21 lists the activities excluded from core and from supporting activities.
Singapore	Three requirements: the objective, novelty or technical risk, and a systematic, investigative and experimental study.