Software and R&D



Initial Meeting


Facts and Figures

Submissions and Review



A recent HMRC conference on the R&D relief was told there are 100,000 software development companies in the UK and only a small fraction of them (perhaps 10%) are currently claiming R&D tax relief.

Of course, not all of them will be doing R&D, but producing successful new software can be inherently challenging, as it has to operate in conjunction with other systems that may use different protocols, and it has to function in an ever changing landscape – so Apple for example have produced four new versions of their operating system in a year. What works at a small scale prototype level then has to be tested for scalability, as new problems will emerge around scheduling and capacity once the volume of data increase.  On top of that, the need to make software web friendly for access from a variety of different devices, from mobile phones to desk tops, just adds to the complexity of the challenge.

In consequence, a great deal of software development does meet the requirements to be R&D. Despite this, a lot of companies do not claim, and software claims have a reputation for often being hard to agree with HMRC.

This is because the HMRC staff are not technologists, and have only a fuzzy idea of how software works. Therefore they may not appreciate the level of uncertainty that exists as to whether a particular software architecture or process will work successfully without testing and further development. The fact that you can easily say in words what the software will do does not mean that achieving the desired functionality in software is a simple task!



This is an area where MSC R&D’s software professionals can make all the difference, as they have the knowledge to understand your challenges and the experience of presenting such issues to enable HMRC to understand them. Their credentials are such that they also carry weight if there is the need for further discussion with HMRC.

Software R&D can cover a very large part of the development process from checking suitable data sources and filtering techniques through to “fit for purpose” testing of a scaled up prototype. However, identifying this in a way acceptable to HMRC is a skill developed over numerous claims. By using a specialist like MSC R&D you can be confident of getting the maximum available advantage from your R&D claim in a defensible way, and without tying your technologists in knots trying to learn new tax skills, instead of concentrating on the continuing development they are best at.