Claiming for R&D tax credits
As a software developer, you’d be forgiven for not being aware of either the presence of R&D tax credits or the eligibility criteria for making a R&D tax claim. However, it’s an area of finance that should be of particular interest, with the advancements that are made in software and technology as relevant for research and development activity as those from a more traditional laboratory environment.
Since being introduced by the UK government back in 2000, R&D tax credits have been enabling applicable businesses to reclaim 25% of their R&D expenditure. Such a rebate represents a significant investment back into the business and, in some cases, can help organisations continue to engage in such activities.
Eligibility criteria
The criteria for making a claim for R&D tax credits depends on the size of your business. In simple terms, for small and medium enterprises, the business should employ fewer than 500 staff and have a turnover of under €100m (or a balance sheet total under €86m). For organisations larger than this, claims fall under the Research and Development Expenditure Credit (RDEC) for working on R&D projects.
Regardless of the size of your business, claiming a research and development tax credit for software companies is achievable assuming you’re able to demonstrate the following:
- Your R&D work looked for an advance in technology
- This advance had to overcome uncertainty
- The uncertainty couldn’t be easily worked out by another professional in the field
As such, the broad nature of the criteria means a host of projects can potentially lead to a claim, with a software development R&D tax credit enabling you to benefit from costs associated to staffing, sub-contractors, software licence costs, consumable items and more.
Loss-making businesses
One final point to note is that, should you fulfil the necessary criteria but have made a loss as a business, this shouldn’t mean you’re unable to claim. In fact, for loss-making businesses, the opportunity to claim a cash credit against R&D expenditure could be as high as 33% – a figure that could well ensure the continued activity of your business.
For more information on how, as a software developer, you can take advantage of this great tax initiative, get in touch with the experienced specialists at R&D Tax Solutions today. From our offices in Manchester, we can help software developers like you submit successful proposals that will reward your endeavours in research and development.