How to claim back tax from your bespoke software solution

22nd November 2019

Did you know that by investing in a bespoke software solution, you could be entitled to money from the government?

Research and Development Tax Credits is a UK tax incentive designed to encourage companies to invest in R&D. Businesses can reduce their tax bill or claim payable cash credits as a proportion of their R&D expenses. Even failed and shelved projects can be claimed against.

The incentive was introduced in 2017, when the government invested £4.7 billion into Research & Development funding, in a bid to increase productivity in the UK.

The limit to claim R&D Tax Credits is two years from the end of your accounting period. Before this period ends you must submit an R&D Tax Credit claim for any qualifying expenses that you have come across in the development period. 

A business that has automated their processes via bespoke software development and not an off-the-shelf product would be the ideal candidate for R&D Tax Credits. Once a business has invested in a bespoke system, they can begin calculating their time spent on the project – from the first meeting to things such as training and travel expenses.

R&D relief depends on the size of your company and whether the project has been subcontracted to you or not. Off-the-shelf products do not qualify for R&D Tax Relief, as no research and development have gone into implementing them into your business.

 You can claim SME R&D relief if you’re an SME with:

  • less than 500 staff
  • a turnover of under 100 million euros or a balance sheet total under 86 million euros

You may need to include linked companies and partnerships when you work out if you’re an SME.

SME R&D relief allows companies to:

  • deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction
  • claim a tax credit if the company is loss-making, worth up to 14.5% of the surrenderable loss

Grounds for eligibility do change on occasion and it is important to remember that 2018 saw a record number of fresh claims for R&D since November 2017. As the economy changes, so could eligibility for many companies that later come into the knowledge of R&D tax. 

Speak to us about how a bespoke business system could improve your business processes, contact us today.

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