Jul 03, 2023
You’ve probably heard of the government’s R&D tax relief scheme for SMEs: have you dismissed the possibility of making large tax savings because your project isn’t science related?
What if we told you that developing an innovative software solution that makes your business more efficient is also likely to be eligible? Or software that supports delivering services to customers in a new way could be eligible?
Those R&D tax savings could bring your dream software within reach now, meaning your business sees improved efficiency and increased business growth in weeks, not years.
At CmdShiftR we know that small businesses (like yours) deserve to thrive and that a fresh approach to your business systems will free up your time and operating costs to do just that. That’s why we’ll support you with your R&D tax relief application.
Basic R&D tax relief information
If your company
- has less than 500 people
- has a turnover of under 100 million euros
- is a limited company
then you are eligible to submit a claim. The kinds of costs that are eligible include staff salaries, cost of any materials used and costs for sub-contracting, including contracting a software developer to work on the project.
That part seems simple enough, however if you looked into the process and found it confusing, you’re not alone. Many SMEs struggle with knowing how to apply for R&D tax relief because it’s not clear what you can apply for and how it works in practice.
R&D tax relief example
What does it mean in terms of money?
Firstly, let’s look at the money side of it. A successful application means you can claim tax relief in the form of a deduction of up to 186% of the costs of the project against your annual profit.
Put simply, that means you pay corporation tax on a much smaller chunk of your profits.
Example of an R&D software development project
For a project to be eligible for R&D tax relief it needs to involve taking a risk, in other words to try something innovative. Before you start, there must be some uncertainty about how the problem can be solved. Below, we’ll share an example of this in a software project.
A packaging supplier has a goal of making its packaging for food products more eco-friendly. Part of their project is creating new, user-friendly software to allow the customer to design the packaging they need for their food, using the latest eco-friendly materials.
The software allows the customer to select the right food and will therefore calculate which gasses the new packaging needs to be resistant to. The software then designs packaging that is optimised for exactly what the customer needs.
In this example, the software solution tackles the technical uncertainty around creating new software for:
- use by businesses of any size
- designing packaging for many types of food
- different branding to be used for different customers.
The list of requirements and use cases for your software will be different, but the principles will be the same.
Here’s a few more examples of projects that were successful in getting R&D tax relief:
- Developing bespoke new processes, machine modifications or significant factory process improvements to make manufacturing of engine parts more efficient or effective.
- Designing algorithms and artificial intelligence to deliver new functionality for gaming programmes.
- Designing voice recognition technology for use in automated foreign language translation.
- Designing new technologies and methods of working to make utility supply cheaper and more efficient.
How to claim R&D Tax Relief
Luckily, this is the easiest part when working with CmdShiftR.
Finding the best and most efficient way to do things is in our nature, so naturally we want to make it as affordable as possible for you to get the bespoke software you need; whilst also making it a painless process along the way.
We work with a specialist SME tax consultancy, EY Breakthrough Incentives, to write your application to HMRC and present your case in the best possible way. They’ve already helped small business owners reclaim over £60 million in tax benefits, so you’ll know your application has the best chance of succeeding.
All you need to do is provide us with the relevant information, which usually means a discussion with a tax relief expert about the project and what it will mean for your business.
With R&D tax relief, you might be able to start your dream software project right now: get in touch with our friendly team to explore your options.
If you want to know more about whether now is the right time for your business to invest in bespoke software, read our blog on “Does your business need a customised software solution?”.