13TH APRIL, 2022

Does your software company qualify for R&D Tax Credits?

“The advance of technology is based on making it fit in so that you don't really even notice it, so it's part of everyday life.” - Bill Gates.

The world is on the cusp of a technological avalanche, where artificial intelligence and augmented reality are rapidly becoming part of our daily lives. For this reason, software development is packed with possibilities when it comes to claiming lucrative R&D Tax Credits.

What is the R&D Tax Credits scheme in Ireland and how much can be claimed?

R&D Tax Credits are offered by Revenue as a way to encourage company growth and innovation in Ireland. Claimable by companies of any size and in any sector (not just software!), this very generous relief has been around in various forms since 2004.

Essentially, the credit means Ireland-based companies can claim up to 25% of their qualifying research and development costs back. This is on top of the usual 12.5% revenue deduction available for general R&D expenditure. This means a total of 37.5% of eligible R&D costs can be claimed back to offset a company’s current year’s Corporation Tax liability. Any excess can also be carried back for offsetting against the Corporation Tax liability for the previous year, with anything after that received as a cash credit over a three-year cycle.

It may also be possible to claim a separate R&D Tax Credit to help cover any costs incurred on the construction or refurbishment of an eligible R&D building. To claim this, 35% of the building must be for eligible R&D purposes across a period of four years. This is especially useful where there’s an element of manufacturing or construction that forms part of the R&D process.

How do R&D Tax Credits apply to software development?

The software industry is evolving constantly, making it a prime breeding ground for innovation and R&D. Even if a project actually failed in its original objectives - or was abandoned altogether - the very fact that scientific and/or technical R&D took place is often enough to trigger a claim.

The point to note here is that an advance in science or tech that benefits the wider field of software development (or whatever industry the company is in) must have occurred.

If you think your company may be eligible for R&D Tax Credits, ask yourself the following:

  • Are the activities systematic, investigative or experimental?
  • Are the activities being carried out in an approved field of science or technology?
  • Do the activities achieve Revenue’s definition of R&D?
  • Does the company seek to make a technological or scientific advancement?
  • Do the activities resolve a technological or scientific uncertainty?

If you can answer ‘yes’ to any or all of these questions, R&D Tax Credits success should follow (as long as you don’t try to DIY it of course!)

Usually, R&D is found in the search for new architecture techniques or software constructs, taking place at the algorithmic, design or architectural level. It’s worth noting though that the customisation of software to a company’s needs is not enough to qualify; the project must make a technological advance for the field. The key to working out if your project would qualify is proving that an industry professional could not easily deduce your method.

What parts of the software development process can R&D Tax Credits apply to?

How long is a piece of string?! But as a starter, R&D Tax Credits can be claimed in relation to:

  • Planning - outlining and estimating for the R&D elements in your project will qualify.
  • Analysis, design and development - activity relating to the R&D activity will qualify.
  • Testing - as long as the tests aid development, they qualify. Confirmatory tests after or during the project is completed will not qualify.
  • Maintenance - in general, maintenance activity does not qualify, unless new problems emerge which require R&D.

Common projects include translating models into code, ensuring applications/processes will function in different environments, or developing internet security or advanced mathematical programming.

Do I need to keep records to prove to demonstrate the uncertainty?

Yes - absolutely. Keeping accurate records is a crucial way of maximising your R&D Tax Credit claim.

It’s all about demonstrating to Revenue that the aim of your project was to resolve a specific uncertainty. A good way of doing this is to show that a developer who’s competent and experienced in their field couldn’t solve the problem readily.

And the other big thing? Showing that an off-the-shelf solution simply wasn’t sufficient - this is particularly the case with software development. Because let’s face it, there’s nothing very creative or innovative about that. So make sure you show specifically in your claim that you were pushing the boundaries of possibility and working on something disruptive. This is something are team are more than happy to discuss with you.

Tax Cloud for software development R&D Tax Credit claims

Software development is innovative by nature so don’t risk missing out. Thousands of euros of tax rebate are easily at stake that, if claimed, could jumpstart your company’s next exciting project.

Created by the R&D tax experts at Myriad Associates, Tax Cloud was founded on the belief that companies should have a choice in how they want to make their R&D Tax Credits claim. That’s why we offer our full Myriad consultancy service (basically where we do everything for you), as well as the Tax Cloud portal. This is more hands-off in that you enter your figures and create your R&D technical report yourself, but with full support from our experts along the way.

It’s well worth understanding the differences between the two. However, many SMEs in particular find that Tax Cloud works really well for them, not least because the fees on success are far lower.

As you’ll see from our glowing reviews, we’ve processed successful, maximised R&D tax claims from across Ireland the UK. Not only do our clients tell us they love the speed and ease of putting together their claim on Tax Cloud, but also the support on offer. So your tech team can spend less time on claiming and more time on software development.

Think your software company could be due thousands in R&D Tax Credits?

Take a look at the Tax Cloud portal for businesses and try the free demo. Then when you’re ready, get signed up and start your claims process today.

And of course, if you have any questions or need any further advice you can give the Tax Cloud team a call on +353 1 566 2001 or send us a message.

Barrie Dowsett, ACMA, GCMA
Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud
Start your Tax Cloud claim now Discover if you qualify and ensure your R&D tax claim is maximised. Get started
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Myriad Associates helps businesses maximise tax credits and secure R&D grant funds. We specialise in R&D Tax Credits, Enterprise Ireland grants.

  • Submitting R&D tax claims since 2001
  • 100% success rate
  • Over €100m claimed and counting
  • Industry leading specialists
  • In-house technical, costing and tax experts
  • Member of the Research and Development Consultative (RDCC) committee

Meet some of the team behind Tax Cloud

Barrie Dowsett Barrie Dowsett ACMA CGMA Chief Executive Officer
Lisa Waller Lisa Waller CTA, ACCA R&D Tax Manager
JEan Rollinson Jean Rollinson Senior Technical Analyst/Writer
Rabia Mohammad Rabia Mohammad Corporate Tax Associate