Research and development expenditure – R&D for IT Software Companies
Computer software projects that are looking to achieve advancement in information technology and computer science need R&D. Advances in Information technology and computer science usually mean advancements in capacity and overall knowledge in both fields.
It is not only an advancement in a sole company’s state of capability or knowledge, except where proprietary considerations make such advancements unavailable to the company.
Typically, advancements in computer software projects will include a search for new architecture techniques and new software constructs. Advancements in computer software projects typically occur in the architectural, design or algorithmic levels.
Advancements more often than not need the scope of the project to go beyond adaptation, copying, and routine analysis of existing software processes and software products.
It is very rare to have implicit advancements in computer software. An improved or new information system does not necessarily mean that there is an advancement in technology or science.
The advance typically comes from the technology layer rather than from the application layer. Advances have to be on the science of technology, which makes it possible to develop the application that legitimizes the advancement as R&D.
Types of Software that are Eligible for R&D Tax Credits
If you have any software projects in the following or similar verticals you may just be eligible for R&D tax relief:
1) New functionality for ongoing R&D projects, or high tech software for new projects.
2) Tools that enhance or improve the functionality of an operating system or application software programs.
3) Extensions to operating systems, programming languages or database software.
4) Software development equipment and technologies such as tools for character recognition or image processing, or tools used to transfer data across different platforms.
5) Innovative data management techniques such as new data structures or novel presentation of objects.
6) Novel ways of protecting, manipulating, transmitting and capturing data.
7) Software designed to operate new computer hardware.
8) Software designed to run tablets, mobile phones, and handheld GPS among other devices with preinstalled operating
9) Novel techniques for integrating software platforms and hardware. Software Project Activity that can be Eligible for R&D Tax Credits
2) Developing, designing and analyzing the technology
3) Identifying uncertainties
4) Managing and planning projects
5) Feasibility studies
6) Testing the software, process or product
7) Reviewing competing and new technologies
8) Production of technical specifications meant to support and explain the R&D projects, and advancements made
2) Finance, personnel and administration services specifically needed in running R&D.
Software Project Expenditures Eligible for R&D Tax Relief
You are eligible for tax relief on any costs on capitalized expenditures (as long as assets acquired are intangible assets) and any expenses in the Profit & Loss accounts. The main cost areas from which you may claim R&D relief include:
1) Staff expenses (employer’s pension contributions and employer’s NI, gross pay)
2) Consumable items (power, light, heat, equipment, and materials transformed or used in the R&D process). 3) Externally-contracted workers (agency workers)
4) Software license costs
5) Freelancers/subcontractors
Staff Roles that you can Claim for Software Project R&D
It is common to find software projects with persons from different departments in the company. The R&D team may have members of senior management, Cost Accountants, Testing and Quality Control specialists, Project Co-ordinators, Engineers, the Lead developer, and an R&D Manager.
