Would R&D tax relief have resolved the KFC crisis
Fast food eaters will no doubt be aware that KFC was forced to shut 470 branches across the UK in February. The cause, it has been reported, was a computer system failure that meant delivery firm DHL experienced disruption to its supply chain.
A new computer system that had been installed to handle orders at the DHL delivery hub in Rugby had a software problem that caused the delays to chicken deliveries. Here, we explore how R&D tax credits could have prevented or reduced the impact of this event.
R&D tax relief for software companies
R&D tax credit claims are complex when it comes to software development, but that doesn’t mean they should be overlooked. When creating an order system to deal with vast quantities of a product, research and development activity is inevitable, and the tax relief available can help to avoid issues such as the one that caused the chicken shortage at KFC.
Claiming tax relief for R&D work undertaken to create the software means the company developing it can have vital funding to fix issues or develop the next release. This would help to avoid large scale problems like that experienced by DHL, in turn saving clients from huge losses.
What projects qualify?
When it comes to R&D tax relief, what the software does is less relevant than how the outcome is achieved. The following projects are examples of eligible R&D activity:
- Devising new functionalities for existing products
- Developing new data management techniques
- Exploring innovative methods of capturing or protecting data
- Creating extensions to database software, programming languages or operating systems
In such cases as the above, a raft of activity is needed which could qualify for the tax credit. This includes identifying uncertainties, conducting feasibility studies, designing and developing the technology, and testing the product or software.
By working with professional tax specialists to identify where activity and projects qualify for relief, software companies can not only recoup some of their expenses, but also continue to develop, test and refine their products to minimise the risk of a failure following release.
Successful claims require supporting documentation to evidence the nature and veracity of the R&D work. This can be gathered in a number of ways:
- Adding comments to source code to identify where experimentation has been undertaken
- Minuting discussions around technical obstacles and experimentation and sharing them by email
- Tagging comments, notes and minutes with ‘R&D’ to make them easier to identify when it comes to making a claim
Making a successful claim
Making a successful claim requires the help of a tax specialist, particularly when complex claims such as those for software development are involved. At R&D Tax Solutions, we have experience in helping software firms claim R&D tax relief, and can assist companies across the UK with the process. Contact us today on 0161 298 1010 to find out how we can assist your business.