Many companies continue to miss out on the very generous tax reliefs given for R&D expenditure, particularly those developing software for use in their financial services activities.
Software is specifically recognised as a technology; its development is often difficult and uncertain, and the resolution of technological uncertainty is just what R&D relief is about. If your staff are competent professionals working in the field, and they consider their development assignments to be uncertain as to whether or how results can be achieved, then HMRC is almost bound to accept the principle of a claim. Nor does it matter if competitors have already found a solution – as long as they have not made their discoveries public.
We have considerable experience of financial services companies making successful claims in such fields as:
- securities trading
- asset management
- internet security
- interaction between systems (this is accepted as a possible technological uncertainty even where individual systems themselves have been fully developed)
- building functionality for clients' own adaptation
- migration to the internet.
What are the benefits?
A small or medium sized enterprise (SME) (with up to 500 employees) currently obtains a tax deduction of 200% (soon to be 225%) of qualifying R&D cost. So a taxpaying SME may derive a 34% cash benefit from categorising cost as qualifying R&D. A loss making SME may be able to claim a payment of 25% of cost, even where no corporation tax has ever been paid, and for some current periods, where no PAYE nor NIC has been paid. Larger companies may obtain a tax deduction on 130% of cost.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
