Claiming R&D Tax Credits for software development projects

Software development is an essential part of the digital economy and projects in this sector represent a large proportion of claims under the R&D Tax Credit scheme. Whether designing custom software for clients or developing and licensing digital products for sale we explore what qualifies and how to build a robust claim.

What qualifies as R&D in software development?

A software development project may qualify for R&D Tax if:

During a software development project

The end goal of an R&D project is in advance in software development

During an R&D project

As part of a larger project software development was required to achieve a separate scientific or technological uncertainty.

As with any other R&D project it must have qualifying R&D and:

Our highly qualified tax and technical consultants are here to help you

Only activities that directly or indirectly contribute to R&D are eligible for relief.

Efforts to push technological boundaries or solve complex problems.
Implementation of non-trivial solutions.
Testing or experimentation to resolve technological uncertainties.

Activities unlikely to be eligible include:

Routine testing or maintenance.
Simply assessing and adopting existing technologies without advancing their capabilities..

What InnoFund clients have claimed for previously:

Machine Learning and AI Development:

Creating algorithms that can learn and make predictions, such as a neural network capable of recognising patterns in large datasets or an AI model that enhances natural language processing.

Blockchain Technology:

Implementing blockchain for secure, decentralised applications, such as a new system for tracking transactions or supply chain management.

Cybersecurity Innovations:

Developing advanced encryption methods, intrusion detection systems, or security protocols to protect sensitive data in innovative ways.

Augmented and Virtual Reality (AR/VR):

Creating new ways to integrate AR/VR into applications, such as developing a virtual reality training platform for complex machinery.

Data Processing and Analysis:

such as a new data mining tool for extracting insights from unstructured data.

IoT (Internet of Things):

Creating software that enables devices to communicate with each other or with a central system, such as a smart home system that learns and adapts to user behaviour.

Software Integration:

Developing solutions that enable different software systems to work together in new ways, such as integrating legacy systems with modern cloud-based platforms.

User Interface and Experience Innovations:

Designing new user interfaces or experiences that significantly improve accessibility or usability, particularly in complex or high-stakes.

Building a robust claim:

While the scope of qualifying activities is intentionally broad, understanding whether your project qualifies can be tricky, and many businesses often miss out on significant savings, or worse, end up with protracted claim checks. HMRC pay particular attention to the speed at which software evolves and uses its own computer specialists to assess claims. At the moment, we’re seeing a large number of software claims being challenged in HMRC’s compliance checks. We recommend clients:

Clearly define the baseline of the field of science and technology at the time the
project started and reference this
Show how your project sought to advance against this baseline
Explain clearly the uncertainties that were overcome
Restrict your scope to exclude routine testing and development that would occur on
other projects

Subsidised/Subcontracted R&D
For accounting periods beginning on or after the 1 st of April 2024 the new merged scheme (RDEC) will come into play and firms will be prevented in claiming work that is subcontracted to them.

How We’ll Support You

InnoFund employs Scientists, PhD engineers, ex-HMRC inspectors a Chartered Accountant and CEDR accredited mediators to run through your projects with a fine-tooth comb leaving no stone unturned whilst maximising HMRC compliance. We manage your claim proactively, minimising your time investment so that you can focus on core business
with the following in scope:

Identify the appropriate scheme for your business. 
Conduct a comprehensive review of your R&D activity to maximise your claim. 
InnoFund take the burden of report writing to free up your time 
Prepare a claim that minimises potential HMRC queries. 
Unrivalled HMRC dispute resolution headed by the UKs leading R&D Tax compliance expert with accredited mediators in the event of HMRC enquiries

Safeguard Your R&D Tax with InnoFund

Partnering with InnoFund gives companies a unique opportunity to utilise SecuRD®, our proprietary solution which we believe is the safest way to claim R&D Tax. We add value to clients by leveraging InnoFund’s expertise in both R&D lifecycle management and R&D Tax Credits, act today to maximise the success of your future R&D claims from services such as:

01 Analysing previous R&D and benchmarking it against the baseline of your industry

02 R&D lifecycle management consulting and R&D road mapping to increase your chances of innovation and the size and security of R&D claims in the future

03 Safeguard future R&D relief by strategically reviewing your current operations to maximize benefits under available R&D funding options.

04 Visualise the value of a future tax benefit with upcoming R&D projects and allow commercial teams to tender for work more competitively

Value Added - Beyond R&D Tax

We take a holistic approach to see if any of your innovations are available for grant funding
or are if they can be patented through InnoGuard to benefit from Patent Box Tax Relief

You need to

Ready to claim?

Book a call with a Software specialist.