Claiming R&D Tax Relief for Software Development

Published on January 31, 2018 by Red River

Posted in Business


Did you know that the development of custom or bespoke software for your business could qualify for R&D Tax Relief? As experts in delivering innovative business-critical software products, over the years we’ve advised many of our customers to successfully claim against this often overlooked (or misunderstood) windfall. And when you consider the often sizeable investments that go into developing custom software to deal with the complex requirements of a growing business, a generous tax saving can be most welcome and go some way toward funding the project.

What can you claim for?

In software development projects, there are generally two pots of cost that make up the bulk of any claim:

  1. Subcontracted Costs – our costs for subcontracted R&D
  2. Staff Costs – including wages, salaries, bonuses, employers NI contributions and employers Pension contributions

Your staff may be involved in project management, strategic decision making and user acceptance testing which, whilst not overcoming the technological challenges of the development itself, are a fundamental part of the success of the development project.

When can you claim?

The claim is submitted as part of your end-of-year corporation tax return on Form CT600, so any claim will be linked to when you prepare your accounts. (Naturally this can mean there might be a significant gap between our work and your tax saving – worth remembering).

How much is it worth?

In simple terms, if you subcontract Red River for a software development project then 65% of our costs can be included in your overall project costs and you could reclaim up to 21.67% of the cost of our work on research and development. If you have a team of people involved as well, up to 33.35% of their costs could be refunded. There is some complexity to this of course and we’re happy to put you in touch with an R&D Tax Relief specialist who can advise and help with your claim.

Other things you need to know to qualify

You need to be a limited company within the remit of UK Corporation Tax, you don’t need to be paying tax to benefit.

To qualify for this level of R&D Tax Relief you must be an SME (Less than 500 staff globally, less than €100m turnover and less than €86m balance sheet), the R&D project needs to support your existing trade or a new one you intend to carry out as a result of the successful project, and the project needs to be advancing science or technology through the resolution of scientific or technological uncertainty (don’t worry, this is our bit, certainly for the software development).

What next?

Well first we need to know about your project so get in touch to have a chat about what you want and how we can help you achieve it. Once we know what you need, we can let you know whether we think our work will qualify. Even if it doesn’t it could be that you have a wider project that does and that although our part of the work is routine, it performs an essential element of the project, in which case our costs might still qualify.

If you’d like us to put you in touch with an expert to help you claim back some of your costs through R&D Tax Relief, just let us know and we’ll make the call!

Featured image by Igor Ovsyannykov