JudgeDread
Registered User
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I have a software client and claim the R&D for them. Revenue asked us last year to send in the backup and they had no problem with it.
Just list the P&L items and allocate a % of it that is not R&D. We disallowed very little and Revenue were happy enough with it.
There is no ambiguity in the R&D claims I handle. As with all Revenue audits, Revenue will always challenge so you must be able to demonstrate the R&D element.
I think the original question was how to calculate it, not if he qualifies.
I have a software client and claim the R&D for them. Revenue asked us last year to send in the backup and they had no problem with it.
Just list the P&L items and allocate a % of it that is not R&D. We disallowed very little and Revenue were happy enough with it.
Hi Paddy,
Do you mind letting me know, what sort of % of the companies salaries was claimed as R&D? Roughly speaking.
That's a nonsense question and a surefire way to get yourself in trouble!
You have to decide which activities specifically were R&D and claim the specific amount of the salaries that related to that work. And if you look at pages 27-28 you'll see what records you'll need to have to support your claim.
You're 1 post away from being able to send/receive PMs by the way..!
Hi Mandelbrot,
I don't think it is a nonsense question, we turn over about 700 to 800 k and having gone through the paperwork and calculations the R&D amount is running at about 350k.
Its simply that this seems to be a very high percentage to me. In previous years I didn't really understand the R&D tax credit I am sure I have significantly under claimed.
We have several projects where experimental development took place, along with doubt as to the outcome. I know the advancement we sought, and I have time sheets and project reports throughout. However, I hadn't, previous to this year, seen some of these as included.
From talking to people about it I have found people completely ripping the credit off and others not claiming, thinking its only for bigger companies.
... or you (and your accountant) may need to engage a specialist consultant to advise, or provide a second opinion, on the R&D credit claim. Even if your accountant is vastly experienced and highly confident on this topic, this is still a prudent option. It will cost a bit, but this should be small in the context of the value of the claim.TBH if your current accountant/tax advisor hasn't the expertise to deal with it for you and been pushing to help you claim a very valuable credit, then you've probably got the wrong accountant.
... or you (and your accountant) may need to engage a specialist consultant to advise, or provide a second opinion, on the R&D credit claim. Even if your accountant is vastly experienced and highly confident on this topic, this is still a prudent option. It will cost a bit, but this should be small in the context of the value of the claim.
My understanding of the area is that there is very little qualifying R&D involved in software development - developing software doesn't generally involve resolving a technological / scientific uncertainty, advancing the overall knowledge or capability in the field...
Generally at the outset of a software development project you know what it is you want to achieve and, more importantly, that it is achievable. How exactly you get there is the uncertainty, but that's not the same thing.
I'm sorry, but that's a silly generalisation. Of course software development does pass the science test in a great many cases and is filled with as much risk and uncertainty as any other development process.
If Google developed a new search engine would you disallow a tax credit claim because it is written in software?
If Ford develops a new engine management system for cars that halves CO2 emissions but uses firmware to do it is that disallowed too?
You do know what you want to achieve but not that it can be achieved. I don't know if it is possible to create an algorithm to solve a specific problem until I try. I don't see that as being any different from creating a new cancer treatment drug.
I don't think I was clear enough in what I said earlier, what I meant was that in software development while there may be an element of R&D, only a relatively small proportion of the overall activity is actually novel R&D - as you say finding the new algorithm would be R&D, but then wrapping that up in your piece of software is largely not R&D.
But you could say that about any R&D activity. My understanding is the R&D tax credit is project based not task based. i.e. you don't simply isolate one or two small tasks that are novel - you include the whole project.
It is project based, but not necessarily 100% of a software development project will qualify - there would/should generally be an apportionment.
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