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Extensive research and development (R&D) is inevitably at the heart of any software development programme, but this does not necessarily mean it qualifies for tax credits.
Proving the eligibility of software development is challenging and a company must show its activity is intended to provide an advance. Use of existing software in a new application, such as to create a website, is unlikely to qualify, while bespoke coding to overcome a unique challenge is more likely to be eligible
The key is the technology behind any software development and the issues it is designed to overcome, rather than the commercial outcome. Given the potential lack of clarity, HMRC uses a group of IT experts to assess applications in this area, making expert advice essential if a claim is to be successful
Examples of eligible activities
- Creating bespoke software to improve business
- Development of software to support new hardware
- Creation of new algorithms to support systems
- Design and development of bespoke applications
- Creation of customised control systems
- Investment in training that supports R&D activities
- Testing of new software
When a school needed to control and monitor the climate of its indoor swimming pool, an electrical engineering firm was tasked with providing the controls. The school needed to store and track data beyond the existing capability of energy management systems, as well as allowing real-time monitoring.
The contractor conducted research into potential solutions and ultimately developed its own software, integrating it with multiple sensors and devices to provide the insight and control its client demanded. The school now has an efficient system that helps protect the health and wellbeing of pupils.
Medical providers need to take more care than ever to protect patient data in the face of GDPR legislation, an increase in medical identity theft and demands for greater efficiency. A family-run chain of opticians found there was no system available that balanced their need for better healthcare with more effective practice management.
The firm invested in the research and development of its own system, incorporating pre-examination questionnaires for patients, a centralised database for stocks of frames, and better management of data. Patients now receive improved care, while the practice runs much more efficiently.
An equine business was struggling with inefficiencies and manual processes that could not be improved by off-the-shelf software.
The company needed to generate unique certificates covering complex information, as well as process orders and arrange shipping. Given the shortcomings of existing solutions and the inability to customise them appropriately, the company decided to develop its own bespoke system. The new software was ultimately able to generate the required certificates and led to a fully automated ordering process.