You hire consultants. You paid them a million, you also made a million on the product they produced that year.

So they were not really 'researchers', working out on unknown with high risk probabilities, instead they were building an asset that made you money the same year.

You would deduct the payment to these consultants as expense. they pay their own taxes on their salaries.

You are left with an asset that you can make money on, year after year.

That's, I think what they are thinking.

But a) you were not prepared to turn your salaried employees into consultants b) the asset requires extensive up-keep, that costs as much as money as it was to 'create it' c) the asset value without the up-keep can become zero in year d) the asset itself is very risky and may not have value later on.

So I overall agree with your sentiment.

The gov does not want to classify software dev as 'research', but yet -- they have not established how to fairly classify it.

This is a clustferfuck.