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Bespoke software and research and development tax credits

Bespoke software and research and development tax credits

29 March 2023

Bespoke software development is an essential part of modern businesses, and it’s often an expensive endeavour. Companies invest significant amounts of time and resources in creating custom software to streamline their operations, improve customer experiences, and gain a competitive advantage. However, many companies are not aware that they can claim research and development (R&D) tax credits for their bespoke software development efforts.

In this blog post, we’ll discuss what R&D tax credits are, how they can benefit businesses, and how you can claim them for your bespoke software development projects.

What are R&D Tax Credits?

Research and development (R&D) tax credits are a government tax incentive designed to encourage innovation and growth in businesses of all sizes. The scheme is administered by HM Revenue and Customs (HMRC), and it allows companies to claim back a portion of the money they’ve spent on R&D projects.

The tax credits are available to any company that has invested in developing new products, processes, or services or improving existing ones. In the context of bespoke software development, R&D tax credits can be claimed for the costs associated with creating software that is innovative, unique, or solves a technological problem.

Why Claim R&D Tax Credits for Bespoke Software Development?

Bespoke software development projects are often complex and require significant investment in time and resources. The costs associated with developing custom software can include salaries for developers, software licensing fees, hardware costs, and other related expenses.

Claiming R&D tax credits for bespoke software development can help offset some of these costs and provide a significant financial benefit to your business. By reducing your tax liability or receiving a tax refund, you can reinvest those savings back into your business, further enhancing your competitive advantage.

How to Claim R&D Tax Credits for Bespoke Software Development

To claim R&D tax credits for bespoke software development, your software development project might need to involve the following:

  1. Innovation: Your software development project needs to be innovative, unique, or solve a technological problem.
  2. Uncertainty: Your project must involve some level of uncertainty, meaning you can’t know for sure whether the project will succeed or not.
  3. Technical Competence: Your project must require technical competence, meaning it must involve a high degree of skill and expertise in your field.

If your bespoke software development project meets these criteria, you can may be able claim R&D tax credits. You’ll need to provide evidence of the costs associated with the project, including salaries, software licensing fees, hardware costs, and other expenses.

You’ll also need to complete the R&D tax credit claim form and submit it to HMRC. The form will ask for details about your bespoke software development project, including its purpose, the research and development activities involved, and the costs associated with the project.

There are many R&D Specialists who can help you with your R&D tax credit claim.

Final Thoughts

Bespoke software development is a crucial part of modern businesses, but it can also be expensive. By claiming R&D tax credits, you can offset some of the costs associated with developing custom software and reinvest those savings back into your business.

If you’re considering claiming R&D tax credits for your bespoke software development project, be sure to consult with a tax professional who can help you navigate the process and ensure that you’re maximising your benefits. With the right approach, claiming R&D tax credits can provide a significant financial boost to your business and help you.

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