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R&D Tax Credits for Software Development

Software companies may qualify for R&D Tax Credits where competent professionals must overcome uncertainty in architecture, performance, security, data, integration or scalability. The test is not whether the product is new, but whether the team sought a technological advance that could not be readily achieved using existing knowledge and standard practice.

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Innovation in software

Software businesses solve technical problems every day.

Qualifying software R&D often sits beneath the visible product. Teams may need to create or materially adapt architecture, algorithms and infrastructure because established approaches cannot meet the required performance, reliability, security or scale.

This includes work across:

  • Cloud-native architecture
  • AI and machine learning
  • Cyber security
  • API and systems integration
  • Data engineering
  • Performance and scalability
  • Distributed systems
  • Automation
  • Fintech and payments
  • IoT platforms
  • Legacy modernisation
  • Testing and deployment tooling

Qualifying R&D may arise where a business is not simply applying known methods, but is testing, adapting or developing a new approach because the scientific or technological answer is uncertain.

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Software innovation activity that may qualify for R&D Tax Credits

Qualifying R&D

How software businesses can qualify for R&D Tax Credits.

Qualifying R&D can arise where a project seeks an advance in science or technology and competent professionals must carry out systematic work to resolve genuine technical uncertainty.

  • Developing non-standard software architecture R&D may arise where established patterns cannot achieve required scale, resilience, latency or availability.
  • Creating AI and machine-learning systems Projects can qualify where uncertainty exists in model behaviour, accuracy, data quality or deployment performance.
  • Solving cyber-security challenges New approaches to identity, encryption, detection or secure processing may involve qualifying technological uncertainty.
  • Integrating complex or incompatible systems R&D may arise where undocumented behaviour, data constraints or performance requirements demand new technical methods.
  • Improving performance and scalability Systematic work on concurrency, distributed processing, databases or infrastructure may qualify beyond routine optimisation.
  • Developing data and cloud engineering methods New pipelines, processing approaches and deployment systems can qualify where known solutions cannot meet requirements.
Discuss your R&D activity

A note from Simba Mareverwa

Software R&D claims need clear technical evidence.

Software projects can look like routine commercial delivery from the outside, even when the team has worked through difficult scientific or technological uncertainty. A defensible claim must identify the advance sought, the available baseline and why a competent professional could not readily determine the solution.

InnoFund separates ordinary delivery from the qualifying work and connects the technical narrative to contemporaneous evidence and eligible expenditure. That produces a focused claim that can withstand HMRC scrutiny.

Simba Mareverwa
  • CEDR accredited
  • ICAEW Chartered Accountant
  • R&D Community — Certified in R&D Tax Relief, Gold award (December 2025)

Simba Mareverwa

Head of Tax Compliance & HMRC Disputes

  • 20+ years in corporation tax compliance, including leadership of HMRC disputes.
  • Extensive experience defending UK R&D Tax Credit claims under enquiry.
  • Patent Box claim and enquiry experience dating from the scheme’s introduction.
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Client experience

Software Companies Recommend InnoFund

Practical support from a multidisciplinary team that understands both the technical work and the claim.

“Would highly recommend, they know their stuff! They assisted greatly with an R&D claim rejection by HMRC.”

Steven Potts

Finance Director, Sigma Polymers

“Excellent from start to finish, lovely team and a great result. Highly recommended.”

Sam Collins

General Manager, Terra Farmer

Clear boundaries

Not every software project qualifies.

Commercial value, novelty or project difficulty do not qualify a project on their own. Examples of work that may fall outside the scheme include:

  • Routine delivery using established methods
  • Standard installation or configuration
  • Ordinary maintenance and repair
  • Commercial or cosmetic changes
  • Routine quality control
  • Straightforward replication of an existing solution
  • General project management
  • Work completed after technical uncertainty was resolved

Many projects contain a mixture of qualifying and non-qualifying activity. InnoFund identifies the technical boundary so the claim remains accurate and proportionate.

Eligible expenditure

Eligible R&D costs for software businesses.

Costs directly connected to qualifying activity may include:

  • Staff time spent on qualifying R&D
  • Employer National Insurance and pension contributions
  • Subcontracted R&D, where eligible
  • Externally provided workers
  • Software, cloud computing and data costs used for R&D
  • Materials and consumables used in trials
  • Prototype components and testing costs
  • Technical consultancy, where eligible

We trace expenditure back to the qualifying work and apply the rules relevant to the company, contract and accounting period.

Evidence & scrutiny

HMRC risk areas for software R&D claims.

A strong claim explains the science or technology rather than relying on broad statements about innovation. Common risk areas include:

  • Claiming commercial complexity rather than technical uncertainty
  • No clear baseline of existing science or technology
  • Routine work presented as R&D
  • Weak records of trials, failures and iteration
  • Incorrect treatment of subcontracted or customer-funded work
  • No competent professional input
  • Overclaiming whole projects instead of qualifying activity
  • Unclear project and cost boundaries

InnoFund reviews both the technical position and the expenditure so each claim is clear, evidence-led and defensible.

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Questions, answered

Clear, practical answers to the questions businesses ask most often.

Yes. Software businesses can claim where a project seeks an advance in science or technology and competent professionals must resolve genuine technical uncertainty through systematic work.

Qualifying work may include Cloud-native architecture, AI and machine learning, Cyber security, API and systems integration, Data engineering, Performance and scalability. Eligibility depends on the technical advance sought and the uncertainty encountered, not simply the commercial value of the project.

They can. A project does not have to succeed, and prototypes or failed trials can provide strong evidence that the outcome was not readily deducible at the outset. The work must still form part of a systematic attempt to resolve technical uncertainty.

Yes, where the business has to develop or materially adapt technology rather than simply buy, configure or use an established solution. The claim should explain the performance gap, technical uncertainty and work undertaken to resolve it.

Eligible expenditure may include qualifying staff costs, employer contributions, software, cloud and data costs, consumables, prototype materials, externally provided workers and some subcontracted R&D. The exact treatment depends on the accounting period and scheme rules.

Useful evidence includes design records, test results, trial data, technical notes, project plans, calculations, software logs, photographs, failure records, meeting notes, cost records and explanations from the competent professionals who led the work.

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Your next step

Don’t guess. Know for sure.

Got a project you want to discuss? InnoFund separates routine delivery from genuine R&D so claims are accurate, compliant and properly evidenced.

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InnoFund adviser discussing R&D Tax Credits with a telecommunications business