R&D Tax Credits for the Software & IT Sector

This sector includes many technical and software developers. There is often a strong case for an R&D credit for software development. Even when a company has developed software before they can demonstrate innovation in bringing that technology to address different challenges with different clients. Projects may require bespoke methodology and unique architecture solutions which could be eligible as R&D expenditure.

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Average claim value

What qualifies as R&D in the Software & IT sector?

We find qualifying R&D expenditure in developing new operating systems or languages, creating new encryption or security techniques that don’t follow established methodologies, the development and testing of systems, devices or processes and the integration of legacy and new systems. Many companies are specialising in big data analytics where methods for analysing vast amounts of data haven’t existed before and need to be created in a new non-routine way. 

The IT industry is constantly innovating with the design of mobile and interactive services and the evolution of new generation networks.

This sector includes the following types of business.

  • Telecommunications
  • Computer programming, consultancy and related activities
  • Information service activities including Data processing, hosting and related activities; web portals
  • Publishing activities
  • Motion picture, video and television programme production, sound recording and music publishing activities
  • Programming and broadcasting activities

Yes, information and communications companies can claim under either scheme depending on their size and other deciding factors. Of the R&D tax relief claims made in 2018-19 so far, 91% of them were under the SME scheme equating to 75% of the value claimed.

You can claim against certain costs on the project including

  • Employee costs including salaries, wages, Class 1 National Insurance contributions, pension fund contributions
  • Subcontractor costs
  • Software
    Consumable items including materials and utilities
  • Clinical trials volunteers in the pharmaceutical industry