Software R&D Tax creditsWell the answer is possibly. The key is not what your software does, but how it does it.

Software development is one of largest areas of claims for R&D tax relief.  In 2016 6,650 organisations in the IT sector made a claim, with an average claim size in excess of £82,000.  However, we are seeing more and more incidences of HMRC raising enquiries into software and a large proportion of these are down to poorly written technical narratives.

Too often the technical narrative focuses on the functions of the software i.e. what it does, and not what the technical advance i.e. how it does it.  Whilst many find it difficult to differentiate between the functionality of the software and the technological advance, it’s important to demonstrate how the functionality was achieved and why it should be considered an advance on industry wide knowledge or capability.

The development of new functionality doesn’t necessarily qualify for R&D tax credits.  For HMRC to be satisfied that your project qualifies the technical narrative needs to identify the advance in the science or technology knowledge or capability underpinning the development and the challenges faced in achieving it.

Additionally, we are also seeing uncertainties that are framed in a commercial context rather than a scientific or technological context.  Again, to qualify you must be able to quantify both the technical challenge and why the solution wasn’t readily deducible by a competent professional.

Though software and IT is one of the most claimed for areas, it is also an area that is getting a lot of attention from HMRC.

If you are struggling with identifying the technical advance and /or uncertainty for your software based claim, contact our technical team on 01423 815299 for a free no obligation assessment, or take a look at our R&D Tax Credit Page and we will get kick-start your software R&D Tax Credit claim.


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