Morning All
Hope anybody can advise?
A company creates its own industry specific software. The software is used for recording jobs / arranging transport / various reporting / depot management / vehicle management (mileage etc) .
There are ongoing staffing costs directly associated with maintaining and upgrading this software, as well as direct IT equipment. Can these costs be claimed for R&D relief?
Many Thanks
John
Replies (11)
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R & D costs only
you can claim the R & D costs, but the costs associated with maintenance would not come within the definition of R & D.
R & D capital expenditure
You can claim 100% of the cost of capital equipment used in R & D.
Not as beneficial as revenue expenditure.
Additional costs
You can also claim a percentage of the general tech staffs costs if they are involved in testing software releases and you may also be able to claim for management staff costs if they are involved in managment of the project itself.
You probably won't be able to claim all 60k of the developers costs as not 100% of what they are doing will qualify as R&D, but you can also include costs for any software required for the development.
My background is software development and I've submitted over 100 successful R&D claims for software companies, so if you have any more questions feel free to PM me and I'll assist if I can.
Does it qualify?
Don't forget there's a more fundamental question which is whether the project is eligible as R&D for tax purposes in the first place. The project must be seeking an advance in its field, i.e. software, and be attempting to resolve technological uncertainty. As merlyn says, it is unlikely that all the developer's costs will qualify, as there are likely to be aspects of the development work that do not contribute to the resolution of technological uncertainty.
does it qualify ?
As Stratfan says the HMRC would need to see how your project meets their guidelines in terms of R&D tax relief, usually by writing a technical summary.
Also worth mentioning you can claim for the past 2 accounting periods.
Again if you need any advice please feel free to PM me.
Assess the activities involved
Hi John
Your situation is quite common.
The exact answer regarding which costs would qualify depends on the eligibility of the activities undertaken to create the software. This is essentially what HMRC focus on when reviewing R&D tax relief claims. To address this, you need to assess the underlying technologies deployed, rather than just the functionalities, and evaluate them against the legislation.
Assuming there are qualifying activities, it is likely that major upgrade costs associated with staff time would qualify. Maintenance costs are typically considered ineligible. However, there can be scope to include them if R&D activities have taken place as part of the maintenance.
Capital equipment costs are not eligible for the R&D tax relief but you can avail of a tax reduction through the 100% first year capital allowances.
Hope that helps. If you need any further guidance, please let us know!
R&D Tax Credit Accounting Treatment
Hi All
Hoping you can further on R&D related question
Once an R&D tax credit claim has been accepted by HMRC (and monies offset against o/s PAYE) is the accounting treatment :-
Credit : Salary/Nic on the P&L
Debit : Paye Payable
Or would this be treated some other way , eg exceptional item ?
Many Thanks
Thank-you Alatatax,
Thank-you Alatatax,
Another quick one , I hope
If the situation is the CT600 has already been filed with tax payable ,9 months after ARD ( CT not yet paid)
but the amended CT600 will reverse the payable to nil is there any penalty applied on subsequent rejection of an R&D claim ?
Many Thanks
Steve