8TH SEPTEMBER, 2020

Software Projects That Qualify For R&D Tax Credits

Could your company gain a serious financial boost?

From the year 2000 when R&D Tax Credits were first unveiled up until the most recent figures held for 2017-18, more than 300,000 claims have been made. This has all added up to a whopping £26.9 billion in tax relief payments, with many claimants in the software development industry. Could your company be due a slice of this?

Whether you’re a software development company specifically, or it’s just a part of your operation, there’s plenty of opportunities in this sector to claim R&D Tax Credits.

However, when undertaking an R&D project in software development it’s not always easy to decipher which costs will attract R&D tax relief. This article looks at this in more detail, or of course you can discuss your individual project with our expert team by getting in touch.

As a minimum…

The company must be based in the UK and be subject to Corporation Tax. The specific R&D project itself can occur anywhere in the world, but there are very specific rules around how the scheme treats payments to staff, subcontractors and externally provided workers. Again, this is something our team can help you with.

The classic signs

If your software project addressed any of the below then R&D Tax Credits could well be on the cards.

1. The software project looked to resolve a specific technological or scientific uncertainty

This may occur in one of three ways:

Firstly, the project may present a technical challenge which is not easily solvable by a competent professional working in the field. It is also not known from the outset if the challenge can actually be resolved at all.

Alternatively, a software development project may attract R&D Tax Credits if a competent professional can solve it, but it’s not clear how the desired result can be achieved. For instance, the competent professional may have to test different development frameworks, protocols or algorithms until they are confident that the optimal solution has been reached. The important thing is that finding the answer isn’t obvious or easy.

The third type of uncertainty is known as ‘system uncertainty’. This comes about when a development project becomes especially complex because various technologies or systems must interact with each another. If this is the case, R&D Tax Credits may be awarded based on the work needed to resolve any problems with these interactions.

2. The project concerns the advancement of knowledge

This criteria is typically met by a company developing a brand new product, service or process. However, don’t forget upgrading or changing a product that already exists can also mean R&D Tax Credits are awarded. This is because the important thing is the methods you used to do it, and not the end result. In fact, a project can even have failed or have been abandoned - it doesn’t matter, as R&D Tax Credits can still be claimed as long as an advancement in scientific or technological knowledge has been made.

3. The project required routine tasks to be carried out to support it

We’ve found that many of our clients have inadvertently missed off eligible costs because they’re simply ‘routine’ or ‘day-to-day’. However, if these seemingly mundane tasks have contributed a technological or scientific uncertainty being resolved, then the costs involved in them are likely to be eligible.

With software development, a common example of this is in testing or graphics work. However, this must be outlined clearly to HMRC in your supporting technical report, which we will work on with you.

Software projects that have attracted R&D Tax Credits in the past

Common software development projects that tend to qualify for R&D tax credits include:

  • Improving data encryption and security
  • Developing bespoke software that isn’t otherwise available
  • Devising innovative methods of capturing, manipulating, protecting and transmitting data
  • Developing new operating systems or languages
  • Extensions to database software, operating systems or programming languages
  • Integrating software components into a single platform
  • Developing or customising algorithms

Maximising this opportunity

Even the smallest of software projects can yield tens of thousands of pounds in R&D Tax Credit funding. So it’s well worth making sure you don’t miss out on any of it by maximising your claim. In order to achieve this, there are a few things you can do that will make life easier:

Document the project objections

A good idea is to set up an R&D project wiki as a way to keep all documentation accessible in one place.

Ensure that the developers know the basics about R&D Tax Credits

This will help when you come to write up the final R&D tax relief application. You can then reference the issues faced and how they were resolved.

Use accounting software

This will allow you to track R&D expenditure from the start of the project through to the end. Again this makes the process of qualifying your application much easier, as all your accounting records will be in one place.

We also strongly recommend using the Tax Cloud portal

The Tax Cloud is an online portal that allows you to make a claim for R&D Tax Credits quickly, simply and accurately.

Developed by the R&D funding professionals at Myriad Associates, you simply enter your own figures and follow the steps to create a high quality, fully optimised claim. Offering support whenever you need it, the portal means you can rest assured there’ll be no issues with HMRC. It’s excellent value too, and at each stage we’ll be pleased to offer constructive criticism and feedback where applicable. We’ll also check your application through before it’s submitted, and if any questions are raised by HMRC we’ll work on those with you too.

There’s nothing to lose and potentially everything to gain.

Contact us

If you’re ready and raring to go with your claim, the Tax Cloud portal for businesses will get your company the cash it deserves. Of course, if you’d just like to ask a question or receive specialist advice, we’ll be pleased to talk to you. Simply call us on 0207 360 4437 or use our contact page so we can call you back. And of course, don’t forget to read up more on our Software and R&D Tax Credits page.

 

Barrie Dowsett, ACMA, GCMA
Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud
Start your Tax Cloud claim now Discover if you qualify and ensure your R&D tax claim is maximised. Get started
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Myriad Associates helps businesses maximise tax reliefs and secure R&D grant funds. We specialise in R&D Tax Credits, Video Games Tax Relief, Innovate UK grants, Horizons 2020 grants, and Research and Development Capital Allowance Claims.

  • Submitting R&D tax claims since 2001
  • 100% success rate
  • Over £100m claimed and counting
  • Industry leading specialists
  • In-house technical, costing and tax experts
  • Member of the Research and Development Consultative (RDCC) committee

Meet some of the team behind Tax Cloud

Barrie Dowsett Barrie Dowsett ACMA CGMA Chief Executive Officer
David Farbey David Farbey MA, FISTC, FRSA Technical Consultancy Director
Lisa Waller Lisa Waller CTA, ACCA R&D Tax Manager
Lauren Olson Lauren Olson MA, MISTC Senior Technical Consultant