Software

R&D takes place within a computer software project that seeks to achieve an advance in computer science or information technology. An advance in computer science or information technology means an advance in overall knowledge or capacity in computer science or information technology. It is not an advance in a company's own state of knowledge or capability alone, except where the details of the advance are not available to the company due to proprietary considerations.

Usually an advance in a computer software project involves the search for new software constructs or new architecture techniques. If it is present an advance in a computer software project usually takes place at the algorithmic, design or architectural level. In order for an advance to take place the objective of the work must go beyond routine analysis, copying or adaptation of an existing software product or software process. 

In computer software the advance is rarely implicit in the product. A new or improved management information system is not an advance in science or technology. The advance comes not from the application layer, but from the technology layer. It is the science of technology that had to be advanced in order to develop the application that establishes eligibility as R&D.

How Have R&D Tax Credits Boosted the Software Industry in Ireland? Read our blog to find out

What type of software projects can qualify for R&D Tax Credits?

Common examples of software development projects that may qualify for R&D tax relief include:

• state-of-the-art software for new projects, or new functionality for existing R&D projects;
• tools to extend the functionality of application software programs or of an operating system;
• extensions to database software, programming languages, or operating systems;
• software development tools, such as tools to port data across platforms, tools for image processing or character recognition;
• novel data management techniques, such as new object representations and new data structures;
• innovative methods of capturing, transmitting, manipulating, and protecting data;
• software to run new computer hardware;
• software to run on devices with pre-installed operating systems, such as handheld GPS, mobile phones, and tablets; or,
• means of integrating hardware and software platforms.

What activities can be included in an R&D Tax Credit claim for software projects?

In terms of qualifying tasks, the following activities would be considered eligible for R&D tax credits:

• defining technical objectives;
• identifying uncertainties;
• feasibility studies;
• reviewing new and competing technologies;
• analysing, designing and developing the technology;
• producing technical specification or other documents to explain and support the R&D project and advancement;
• testing the product, process or software;
• planning and managing projects.

In addition, certain indirect support activities may qualify for R&D tax relief, such as:

• administration, finance, and personnel services specifically required to support R&D activities;
• training to support R&D.

What R&D expenditure can be claimed for software projects?

You can claim relief on 25% of on qualifying expenses. The main areas of costs that can be claimed are:

• staff costs (salaries, company pension contributions, employer's Pay-Related Social Insurance [PRSI], bonus payments, and health insurance);
• agency workers (externally provided workers);
• individual consultants; and,
• materials used in R&D or prototyping.

What staff roles can be included in an R&D Tax Credit claim for software projects?

It is not uncommon for an R&D team to consist of many individuals from different parts of the business. Your R&D project team may include the R&D Manager, a Lead Developer, Engineers, Project Co-ordinators, Quality Control and Testing specialists, and Cost Accountants, as well as members of the senior management team.