R&D Tax Credits for Technology and Software Companies

Software and App Development, Cloud Platforms, Cyber Security, e-commerce and mobile commerce platforms and bespoke improvements to enhance functionality of those platforms. Artificial Intelligence, Neural Networks, Machine Learning, Deep Learning will all have the potential to qualify.

Ultimately everything boils down to the overall eligibility criteria, which is “An R&D Project, which has a defined start and a defined end, exists where a company is seeking to create a technological advance through the resolution of scientific or technological uncertainty. Where that advance cannot be readily deduced by a competent professional operating in the field.”

There are too many to list, but we have helped companies with FinTech, BioTech, EdTech, InsurTech and RegTech projects, Agritech, FoodTech, CleanTech, GreenTech, Software Developers, App Development, CRM/ERP Development, TeleHealth, and a Debt Recovery business developing a call handling system others would also qualify. For Software and IT projects it is more about the project and less about the industry in which the company operates.

No, absolutely not. Your project just has to be seeking an advance, it doesn’t have to achieve it. Actually, failure no matter how small, is almost a requirement for all R&D claims. If your project went from start to finish with no deviation, you were either very lucky or you knew what you were doing. In either case, HMRC are likely to suggest that R&D didn’t occur if your project progressed without a hitch. So document and embrace your failures.

Yes, but we will need to understand the contractual relationship that exists between you and your customer.

If the work is subcontracted to you, then you can claim the Research and Development Expenditure Credit for your eligible costs, if your customer is either a Large or International company or a UK entity not subject to corporation tax, such as a partnership or an individual. If your customer is a UK SME then they will be able to claim for your subcontractor costs in their own claim.

HMRC are also focusing heavily on subsidised expenditure at the moment, there have been two conflicting judgements recently, which has made this a contentious area. If the financial element of your contract has a significant upfront fee, or all of the money is provided to you on signature, then it is likely that your work has been subsidised. If that is the case you will be able to claim the Research and Expenditure Credit for your eligible costs.

Rishi Sunak’s budget of 2020 sought to refocus the R&D Tax Credits to UK activity. For tax accounting periods that start after 1 April 2023, externally provided workers or sub-contracted R&D that is performed outside the United Kingdom, will not be able to be included in the company’s R&D claim. There are a small number of exceptions to this rule, that relate to clinical trial activity and activities that can’t be performed in the UK, either as a result of geographical constraints (Ocean Research), environmental or regulatory requirements (Clinical Trials). For periods prior to this, the costs are still eligible, so make the most of it while you can.