An introduction to the company
The team at this client are collectively the UK’s leading experts in a third-party software application who help businesses across the country gain competitive advantage with Business Intelligence solutions.
The third-party software is a data-centric suite of products that is continuously developing to collectively deliver industry-leading associative technology for active data analytics within a single cloud platform.
A significant part of this client’s service offering relates to software development relating to the technology environment necessary to integrate the third-party software. The client creates bespoke systems to deliver transformational data intelligence based on the third-party platform and its connectivity with wider legacy organisational systems and databases.
I first met with this client in 2013. The company accountant at that time had just started to work with them and set up a meeting to explore the potential of their work to qualify for this tax relief. I have been working with the team at this client ever since to support them with their annual R&D tax relief claim process.
Relating eligibility criteria
This client is a UK incorporated company within the scope of charge to UK corporation tax.
The client’s development work is required to achieve the deliverables sought by its customers – deliverables being the integration of standard available applications developed by a specific third-party into wider technology stacks unique to the customers wider technology environment. The client’s trade is that of a specific third-party software application reseller, and as such, the development work is relevant to its trade.
We've been working with Claire for over a decade now. She's been with us throughout the evolution of our company, helping us navigate the complexities of R&D that come with changing tax legislation and differences between contractual aspects with our clients. We hope to continue working with Claire for the next decade! - Managing Director
Owing to the size and complexities inherent in some of the UK’s largest organisations, the client finds it is often not possible to simply connect the third-party software as it presents out-of-the-box without making technological changes to achieve performance outcomes across data sources and/or to facilitate the business specific nuances sought for user interfaces that remain intuitive and efficient.
Whilst the client has a wealth of experience and talent within its development team, there is a frequent need to solve problems unique to the integration of the third-party software with customers’ specific technology environments. Sometimes problems can be readily resolved, but there are times where the client faces challenges that require the conception of new or improved technological capabilities to extend the parameters of the third-party software across data extraction, data modelling and dashboard design. In tackling these challenges, qualifying project work (being sub-projects of a wider commercial project) which seek an advance in underlying technology emerge.
Through its work, the client meets a key requirement of the R&D tax legislation: to seek an advance in science and/or technology.
There are a number of ways the BEIS guidelines for R&D recognise an advance and it’s not possible to say one is uniquely right i.e., an advance can be defined in more than one way.
Over the years, many advances have been attempted by the client, a few of these have been selected below by way of example to illustrate how an organisation can think about linking these to BEIS guidelines for R&D:
Founding something that doesn’t exist (para 9(b) of the BEIS guidelines): Finding out how to process enormous data sets in a short timeframe within the confines of a prescribed technology stack that could not cope with the sudden migration of data assets without significant technological changes.
Improving something that does exist (para 9(c) of the BEIS guidelines): Developing data visualisation concepts beyond the intended use of out-of-the-box technology.
Duplicating something in a fundamentally different way (para 9(d) of the BEIS guidelines): Creating a connectivity tool to enable data source extraction from incompatible legacy data consolidation software.
Tax technical point: R&D projects emerging from wider commercial projects must be assessed to work out whether your organisation is entitled to claim for your work and if so, under which scheme of relief.
Seeking an advance in science or technology as outlined above is just one part of the requirements. Your organisation will also need to demonstrate that the solution was not available by reference to baseline knowledge and capabilities in your industry as a whole. Your organisation will be iterating from known principles and approaches to create or extend knowledge and capabilities that represent genuine and non-trivial betterment.
The presence of scientific or technological uncertainty is key, meaning that knowledge of whether something can be done or how to achieve it in practice is not publicly available or easily arrived at from what baseline knowledge is available in the public domain. This is a judgement call by a professional in your industry with relevant and appropriate knowledge and experience.
For most organisations, this will be a judgement call from the technical staff working on these projects, in the client’s case, its project leads with support in surfacing the technical details from the key software developers that worked on its qualifying projects.
I work with in-house staff, year on year, to help them understand and properly assess the challenges faced by their work.
The client’s staff and I discussed the key unknowns, the strategic questions asked as part of assessing whether objectives would be feasible for development or how to achieve things in practice – How? Would? Could? Whether? What?
By way of example:
- How to achieve connection in the third-party software on Windows to certain required protocols? At the time of the project there was no native direct or standardised connection to the data available.
- Whether an alternative approach could be created to pull and aggregate data within the database technology and leverage this alongside standard functionality to ingest greater amounts of data in a fraction of the processing time?
- Would it be possible for a hybrid solution to be architected to impact some, but not all charts? This is significantly more complex than an all or nothing approach.
Tax technical point: Seek support from a qualified tax adviser, analysing the fact pattern present on each project to determine the appropriate filing position - and understand how to back up the factors supporting your claim with evidence.
The client’s solutions rely on applying knowledge in software development and software engineering to iterate methodologies, approaches and techniques to produce new or improved capabilities by reference to the underlying technologies collectively and uniquely employed for the purpose and focus of the advances sought.
The client incurred in-house costs on:
- Employed staff
- Software licence fees
- Utilities costs
- Externally provided workers
Cash resources support future growth
To date over £2.5m in qualifying expenditure has been identified in relation to qualifying activities for the purposes of this relief. The amount of cash benefit realised has varied depending on the overall corporation tax profile for the financial period of account in which the qualifying work took place, and the scheme of relief claimed under.
The financial support accessed through year-on-year eligibility for R&D tax relief/credits is reinvested into the business for growth through funding talented developer resources.