R&D tax credits are not just for ‘tech’ firms

Many businesses don’t subscribe to the 'tech' label and see themselves being part of more traditional sectors. However, technology underpins many businesses that may be creating software solutions eligible for R&D tax credits.

What can be claimed?

Many businesses are constantly investing in software improvements or developing novel applications to better service their customers. However, this work may be seen as a back office function within the business and not a core part of the brand or product offering. Therefore, many businesses do not consider these IT and tech developments as being eligible for R&D tax credits. 

The commercial driver for the IT work is not important for an R&D tax credits claim, but if the software development activities meet the R&D qualifying guidelines a claim can be made. We typically find that companies believe only truly innovative work can be claimed, but they forget that the eligible development can be about improving or enhancing the capability of software platforms. 

However, deploying a new software package is not an eligible project in itself. This implementation may increase capabilities within the practice, but this should be reviewed against the level of knowledge for a competent professional in the IT sector. As set out in HMRC’s recent guidance “an advance in science or technology means an advance in overall knowledge or capability in a field of science or technology, not a company’s own state of knowledge or capability alone”. This is an area where HMRC see many mistakes, and we are seeing a number of software claims being challenged in HMRC’s compliance check.

Where do we find qualifying development?

Retail 

We have seen many R&D claims related to developing novel offerings with an ecommerce platform. Many retailers are moving beyond marketing and selling stock to offering different purchasing models or integrated AI into the traditional customer transaction pathway. Eligible work could be undertaken if the final solution is not readily deducible and involves appreciable improvement to the core technology platform. However, HMRC is categorising claims based on their Standard Industrial Classification (SIC) code and claimants within the retail sector could face scrutiny when submitting an R&D claim based on their SIC code classification. Therefore, businesses need to be certain the work they’re claiming fits with the guidelines.

Publishing

We have seen many claims related to publishing content across an ever expanding range of devices and content formats. There have been many attempts to create content management systems that hold one version of the document, while pushing this content out to multiple platforms correctly rendered. Over time, some of these tools are becoming standard and the eligible work is now focused on those projects that are pushing the capabilities of this type of data repository.  

Travel

Increasingly, we are seeing the move toward micro-services based applications that break the traditional website model to allow for more innovative platforms to be created that match the user journey. These systems integrate with a wide range of third party platforms such as ticketing, hotel bookings or car hire. We have seen multiple eligible developments in this sector to try to keep pace with demanding customer needs. 

These are just three examples of sectors where we have seen successful R&D claims being made and are illustrative of the types of projects that can be claimed. If you want to find out whether the IT developments in your business may be eligible or if you’d like further advice, please get in touch via the form below.