I’ve created a great website – can I claim R&D tax credits?
If you are a website developer or a business owner that has developed a website for your business – there are a few questions it’s worth asking yourself to see whether your company can claim R&D tax credits…
Website and web application developers - questions to ask yourself…
- Have our development activities gone beyond using existing software and templates?
- Have we spent time or money on developing bespoke web based applications or complex software integrations?
- Are our web based applications pioneering in some way?
- Have our activities involved significant experimentation and testing to develop the solutions we were seeking?
- Is there a strong business case for investing in the web based software we have built?
If you can answer yes to the above questions you may well be able to claim R&D tax credits.
In general the rule is that you cannot claim R&D tax credits for routine development activity that only involves using off-the-shelf software or existing templates to build a website; but as soon as you start pioneering in some way e.g. by creating purpose built software such as complex databases, application interfaces or social media tools you are probably undertaking qualifying Research and Development (R&D) sufficient to claim generous tax relief and credits.
HMRC wrote in their recent guidance
“The ICT sector is so fast-moving that further advances overtake new and ground breaking developments very quickly. What is important is that a project represents an advance at the time of development. New encryption and security techniques are being developed regularly and in many cases give rise to further advances. Even if the technique is quickly rendered redundant it will probably qualify for relief. The same applies to new search engines using new search methods. Quote from ‘Making R&D easier for small companies’ HMRC, November 2016.
What R&D can you claim for if you are a software developer?
Most of the R&D costs claimed for tax credits in the ITC industry are the costs of paying staff salaries to undertake or manage software development activities; and/or the cost of hiring external web developers to help with the coding, (the later do not have to be UK based contractors).
The current HMRC rules allow you to claim for your two past tax years as well as the current year once it has competed. You only have to have a couple of in house developers and/or have spent a few thousand pounds on external developer, for your R&D claim to be worth a sizable amount. Make sure you seek advice from a R&D specialist before your current accounting year-end, or you could lose a year of the benefits that you can currently claim, which you may well regret.
This article was published in Cobiz Funding Newsletter - February 2017
Are you ready to find out if you qualify or how much your R&D claims could be worth?