Sunday, 5 September 2021

R&D UK tax Credits for Software development

Overview: R&D incentive claims with HMRC are designed to attract and encourage investment in R&D in the UK.  By providing for a taxable credit at 13% on qualifying expenditure, namely: Staff costs, consultants, Software licenses, hosting.  Claiming R&D costs reduces the companies tax liability and can be attractive for starting a new business or building new SaaS products.

The idea is:

PoC, Concept Design, software design and initial testing are likely to be deemed as probably qualifying for R&D claims.  The product/service must seek to advance (new or appreciable improvement of a process, product or increase technical capability) technology.

Specification/Requirements, scale up to commercial release, training may be qualifying activities. 

Thoughts:  R&D relief claims are complex.  There are different rates for SME vs large corps and rates if the company is in profit.  It is worth doing, and I believe it is pretty common to pay experts based on a percentage of R&D claim.  The big players have divisions to do R&D claims, i.e. KPMG.  There are also tons of specialized smaller firms that will do R&D claims.  For a SaaS startup, I'd contact a specialist provider to make the R&D claims and agree to a fixed percentage of the savings.


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