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What software expenses can I claim for R&D?

What software expenses can I claim for R&D?

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What Software Expenses Can I Claim For R&D?

Nearly all the R&D Tax Relief claims we process includes some sort of software costs which is hardly surprising, as every business today is using some kind of software to support their business, teams of their jobs. We use software in pretty much every business process we do! This is also the one area in R&D where businesses feel most comfortable in making their R&D claim.

But what you might not know is that when it comes to R&D, software is one big grey area, meaning certain software costs cannot be claimed.

In this blog, we are going to be showing you the fundamental rules when it comes to software and what exactly is this grey area.


SOFTWARE COSTS: THE FUNDAMENTAL RULES

The rules around software do look quite straightforward:

  1. If the software has been purchased only to be used in R&D projects, then you can claim 100% of the cost in the R&D claim.
  2. If you use the software for other business activities such as general admin or non-R&D projects, then you will need to calculate an appropriate proportion of the software's cost to be included within your claim.

Sounds simple right? Let's move onto the grey area!

SOFTWARE COSTS: THE GREY AREA  

With software, there is often other costs that are involved alongside the software when it is bought from external parties. It is these costs that fall within the grey area. These costs fall under the scope of 'cloud computing' and charges for the whole range of activities including use of software, storage charges and support will need to be verified to see if they can be included within the R&D claim.


CLOUD COMPUTING & HOSTING

Cloud computing and hosting is particularly relevant for businesses that are involved within R&D Projects, especially when related to a development of software. These 'cloud computing' costs unfortunately do not meet the requirements of any of the qualifying criteria to make an R&D claim. It is quite common when businesses purchase software to support their business operations as well as R&D so it is important to track the cost specifically to hosting, the testing and development enviroment when using the services.

The likelihood is you’ll be using software somewhere in your business, and it could impact your R&D claim. Like a lot of R&D categories, software has its grey areas, but that’s what we are here for, we will work with you to ensure you submit an accurate R&D claim.

As we speak new changes are on the horizon to include cloud computing and data costs, but stick with us and we’ll make sure you’re up-to-date as the changes come in.

THINK YOU MIGHT BE ELIGIBLE TO CLAIM?


If you think you might be eligible for R&D Tax Relief, and you’d like to find out more about how we can help you make your R&D claim, please get started here.

This article was written for Construction Insider and Saint Financial Group. Saint is a multidisciplinary group based in the UK that helps construction businesses develop and grow. SaintFG offers a range of quality solutions in supporting businesses.

Saint provides the luxury of free business consultancy for all of our clients, call now for your free consultation with a friendly business advisor to discuss your burning questions and put that energy back into your business!

Written by:

Dylan O'Rourke MAAT

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