R&D Tax Credits For Software Companies

Making your Software R&D tax credit claim

Introduced in 2000, R&D tax relief is the government’s way of rewarding businesses that are developing new, or improving existing products, processes, services, devices and materials or advancing the state of knowledge in their sector. This encourages companies to continue innovating.

Did you know that the average R&D Tax credit claim is over £50,000? Over £5 billion was repaid last year in the UK alone and yet thousands of companies are not claiming the money that they are entitled to. The Government estimates that 90% of eligible companies fail to claim what is rightfully theirs.

Many business owners are either unaware of the potential benefits of R&D tax credits, mistakenly think they are difficult to qualify for, or simply don’t think the scheme will apply to their business.

Don’t fall into this trap. Research and development isn’t all about scientific experiments, conducted by people wearing white coats. It’s very likely your business is already doing a lot of the activities required to make successful R&D Tax claims.

Getting your head around the tax laws can be exhausting, and the claim process can be complicated. That’s why to have the best chance of a successful claim, you need a specialist on your side.  Our R&D experts will guide you through the process, from looking at the eligibility criteria, to carrying out the claim for you. Yes, we also deal with HMRC directly on your behalf.

There’s no risk attached and the initial assessment will only take around thirty minutes of your time. We’ll thoroughly assess you and if we can’t see an opportunity for you to claim R&D tax relief, you walk away without spending a penny. Here's what to expect.

Does your Software Developement company have a claim?

Companies that spend money developing new products, processes or services; or enhancing existing ones, are eligible for R&D tax relief. If you’re spending money on your innovation, you can make an R&D tax credit claim to receive either a cash payment and/or Corporation Tax reduction. The scope for identifying R&D is huge – in fact, it exists in every single sector. And if you’re making a claim for the first time, you can typically claim R&D tax relief for your last two completed accounting periods.

An important thing to remember with the current tax credit system is, that the project doesn’t necessarily have to be successful in order to qualify. As long as the research qualifies under the definitions in place, the Tax Credit can be claimed, regardless of the outcome of the project. R&D can take place in any sector. It occurs in everything from cheese-making to chemical engineering, and construction to digital development. To benefit from R&D Tax incentives, a company must be:

• A UK Limited company, subject to Corporation Tax
• Have carried out qualifying research and development activities (see below)
• Have spent money on these projects (wages, materials, sub-contracting etc)

The software industry is constantly moving, which makes the industry highly susceptible to many forms of innovation and research and development. Usually, R&D is found in the search for new architecture techniques or software constructs, taking place at the algorithmic, design or architectural level.

The customisation of software to a company’s needs is not enough to qualify; the project must make a technological advance for the field. The key to working out if your project would qualify is proving that an industry professional could not easily deduce your method.

According to the government’s guidelines, there are many parts of the process which can be claimed for:

• Planning – outlining and estimating for the R&D elements in your project qualifies.
• Analysis, design and development – activity relating to the R&D activity qualifies.
• Testing – as long as the tests aid development, they qualify. Confirmatory tests after or during the project are completed will not qualify.
• Maintenance – in general, maintenance activity does not qualify, unless new problems emerge which require R&D.

Qualifying R&D Activities – Software Developement

• Application developments and integration to work in conjunction with existing in-house systems
• Application developments which require fundamental technical updates following software advances made by 3rd party software providers eg. Facebook, Microsoft, SAP
• Development of an internal CRM system operating in a fundamentally unique way
• Development of sophisticated web based system to integrate several companies and to provide 360 capabilities
• Communication systems for use in online transaction processing
• Data tracking solutions
• Development of systems and processes to assist in the capture of animation
• Development of animation systems for use by companies who use this software to design their own products
• Architectural investigations to enable improvements in systems
• 3D Graphics using complex silicon
• Advanced search engines and data mining systems
• Database architecture
• Computer games
• State-of-the-art software for new projects, or new functionality for existing R&D projects
• Tools to extend the functionality of application software programs or of an operating system
• Extensions to database software, programming languages, or operating systems
• Software development tools, such as tools to port data across platforms, tools for image processing or character recognition
• Novel data management techniques, such as new object representations and new data structures
• Innovative methods of capturing, transmitting, manipulating, and protecting data
• Software to run new computer hardware
• Software to run on devices with pre-installed operating systems, such as handheld GPS, mobile phones, and tablets
• Means of integrating hardware and software platforms

Our R&D Expertise in the Software Sector

R&D can take place in any sector. But there are some sectors that invest more often in innovation, such as engineering firms, manufacturing companies, IT firms or companies in the pharmaceutical or aviation sectors.

Our experts have been preparing R&D claims and assisting on R&D related activities for many years. Whilst we help businesses of all sizes, in all business sectors claim tax relief under the HMRC’s Research and Development Tax Credit scheme, it is fair to say that we specialise in identifying and preparing claims for clients within the Software Development sector.

Over the years, we have refined our approach which now minimises the time required of the client in preparation of the claim whilst ensuring that HMRC’s requirements are met. To date, we have claimed over £20 million for our clients in the Software Development field.