Software is treated the same as any other area of technology. Under the R&D scheme, it will be categorised under the same programme requirements. This means every project that involves software development can be considered an R&D activity.
That said, you will still have to use your own judgement to assess the eligibility requirements.
Your in-house IT. What’s not included?
While software activities related to development get the green light, not everything related to it does. For example, internal administration software isn’t.
Let’s break this down further, so it’s crystal clear.
If you’re developing, modifying or customising computer software for the sole purpose or use for internal administration, it’s not a core R&D activity. This includes:
- The entity (the developer) for which the software is developed, modified or customised
- An entity *connected with the developer
- An *affiliate of the developer, or an entity of which the developer is an affiliate.
When we talk about internal administration, this includes things like management information systems, and software that’s connected with daily admin needs. If the software system is a core component of your business operations, it’s not classified as an R&D activity.
It’s important to be able to look at your software activities from an outsider’s perspective. If you do require IT for the purpose of completing the claimed activities, this is another story.
This brings us back to good record keeping. You’ll need to provide evidence regarding software development.
Consider a few of these points when deciphering what is and isn’t considered an R&D activity.
- What type of software is it? If the software in its current form is on the market commercially then its no longer considered in R&D. However if you are developing a NEW version of the software it may still qualify.
- Is it adapted to your company’s needs, so it’s unlikely others will buy it? If so, then parts of the test could be excluded.
- Is it used in the internal administration of your company? As previously mentioned, it can’t be an R&D activity.
- What is the software primarily used for? If it was ever used in-house in that manner, it’s unlikely to be eligible, even if it’s not being used currently.
- When was it first used? What was the outcome of the activity? Even if you originally bought it to sell and now it’s in use, you can’t claim it.
- If you ever used the software to claim for another action, it won’t be included.
Software tax incentives doesn’t need to be tricky
There are a lot of grey areas when it comes to R&D and IT. Remember, you need to keep in mind whether specific software development activities complement your core R&D activities.
Do your research, or partner with a specialist who understands the grant process.
Book in your free consult with Ray to learn more about what software activities you can claim. Although this can seem confusing, with us by your side, we’ll make sure your application gets over the line.
Contact us today to see what you can claim.
