R&D Tax Credits for Software Projects

25th November 2019

Many of the Software Developers, Web Design and Digital Agencies that we speak to, do not realise that the work that they do day-in and day-out makes them eligible to claim R&D Tax Credits!

What is R&D?

We often find that businesses are under the illusion that research and development is only conducted by people in white lab coats or engineers tinkering.

Fortunately, we are here to inform you that under HMRC guidelines – R&D is considered as any activity that seeks to “achieve an advance in overall knowledge or capability in the field of science or technology and resolve scientific or technical uncertainty.”

In plain English, this means – if you are working on something that has made you scratch your head, and that a competent professional in that field (for example, a senior developer) couldn’t easily solve, then it’s likely to be R&D!

Swift R&D Top Tip: To be considered R&D, projects do not have to be successful in achieving the desired end-result; the unsuccessful attempts are still R&D.

Eligible activities

The HMRC guidelines for R&D Tax Credits can sometimes provide more confusion than clarity on what is classed as eligible activities. To illustrate what everyday activities could make you eligible to claim R&D Tax Credits, we have some examples:

  • Creating algorithms
  • Third Party API (Application Program Interface) integration
  • Bespoke metric analytics
  • Bug fixing – which required further testing and development
  • Creation of difficult code and logic
  • User testing
  • Developing custom apps
  • Development of automated testing software
  • Custom databases/CRM’s
  • System feasibility

Does this ring any bells with what your business has been working on recently? This is just a sample of eligible activities and is by no means an exhaustive list.

Unfortunately, there are a few simple exclusions that we should mention too:

  • UX (User Experience)
  • Aesthetics such as updating of graphics/fonts etc.
  • Anything involved with Word Press

Under the SME Scheme, you can claim for different categories of expenditure – these include PAYE staff costs, agency worker costs, sub-contract costs, software costs and materials costs. This is applicable within all your eligible activities and projects.

Swift R&D’s process is specially designed to help you to build robust and successful reports to be submitted to HMRC – find out more about our process here.

Our team of expert Consultants are on-hand if you require any assistance, to produce a maximised R&D Tax Credit claim – you simply need to get in touch or you can calculate how much your claim could be worth by using our online R&D Tax Calculator.

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Chris Stuttle