Software and AI R&D Tax Credit Specialists
Software development qualifies for R&D tax relief when it resolves a technological uncertainty in computer science or software engineering that a competent developer could not readily solve with existing knowledge and tools. Building a new product is not enough on its own: the technical problem has to be the new part.
What software work qualifies?
Software work qualifies when the uncertainty is technical, not commercial. The government guidelines say work to advance software is R&D when it seeks an advance in overall capability, so the question is always what the professional community could not already do.
Examples that can qualify
- Achieving performance, latency or scale that existing architectures could not, and proving it through experiment
- New algorithms, data structures or methods for handling unusual data volumes, formats or quality
- Machine learning work that advances the model technique itself, such as new training methods for scarce or noisy data
- Integrating systems where documented methods failed and new approaches had to be devised
- Security or cryptography methods that go beyond established practice
Examples that usually do not
- Building a web or mobile app with standard frameworks, even if the product is new
- Configuring off the shelf platforms, CRMs or ERPs
- Wrapping a third party AI model through its API without advancing the underlying technique
- User interface design, content and routine bug fixing
- Data migration and routine testing
Why does HMRC scrutinise software claims?
HMRC scrutinises software claims because the line between routine development and R&D is hard to see from outside, and many weak claims have described ordinary product development. HMRC has also said that, for AI projects, the uncertainty must be within AI itself, not in applying existing AI tools to a business problem. Expect questions on the baseline, the specific uncertainty and why a competent developer could not have solved it.
What costs do software companies claim?
Software claims are usually driven by staff costs for developers, engineers, data scientists and their direct managers. Since April 2023, cloud computing used for R&D (such as compute and storage for development and testing, not live hosting) and data licences have qualified. Contractors need care: after April 2024, contracted-out R&D and externally provided workers generally need to be in the UK.
How should you evidence a software claim?
- Architecture decision records and design documents showing options considered
- Tickets, pull requests and experiment logs tied to each technical uncertainty
- Benchmarks before and after, with the target you were trying to reach
- A clear end point where R&D stopped and routine rollout began
- Time records or a defensible apportionment method for each engineer
What should a software R&D specialist bring?
A good software specialist should have people who can talk to your engineers as peers, challenge projects that will not stand up, and turn your technical detail into a narrative an HMRC officer can follow. Ask who will interview your team and what their software background is.
Example: how a software uncertainty is described
Illustration. A logistics SaaS company needed to recalculate delivery routes for 50,000 vehicles in under a second as traffic data changed. Published routing algorithms either took too long at that scale or produced poor routes. The team tested several approaches to partitioning the problem and caching partial results, discarded two that broke under real data, and arrived at a method that met the target. The R&D was the work to achieve the speed and quality together; the user interface and customer integration were routine.
Typical cost profile
| Cost type | How often it features | What to watch |
|---|---|---|
| Developer and data scientist staff costs | Almost always the largest cost | Apportion by time on uncertain work, not whole salaries |
| Cloud computing | Common since April 2023 | Separate development, testing and training from live hosting |
| Data licences | Common in AI projects | Only licences used directly in the R&D |
| Contractors and agencies | Common | From April 2024, generally UK work or UK payroll only |
| Software licences | Common | Apportion tools used for both R&D and other work |
What does HMRC focus on in software claims?
- Whether the baseline describes the state of the field, not just your old system
- Whether uncertainties are technical rather than about features, design or customers
- Where the R&D started and stopped, so that rollout and maintenance are excluded
- For AI, whether the work advanced AI itself or applied existing tools
How much of a typical software team's time qualifies?
It varies widely, and there is no standard percentage. A team building a new technical capability may spend much of a year on qualifying work, while a team maintaining a mature product may spend little. Base the figure on the projects and records, not on what other companies claim.
What should you ask an R&D specialist about software and AI claims?
- Who on your team understands our stack well enough to challenge our engineers?
- How will you separate R&D from feature development in our sprints?
- How will you treat cloud costs across development, testing and production?
- How do you handle AI projects after HMRC's comments on applying existing tools?
Software claims are where an experienced technical writer adds most value, because the difference between a strong and a weak claim is usually in how the uncertainty is described.
Frequently asked questions
Does agile development make R&D harder to claim?
No, but it changes how you evidence it. Tie sprints and tickets to the technical uncertainties, and record when a problem was resolved, so the R&D can be separated from feature work.
Can we claim for failed software projects?
Yes. A project that tried and failed to resolve a technological uncertainty can still qualify, provided the work was genuinely R&D.
Do cloud hosting costs qualify?
Cloud costs qualify only when used directly for R&D, such as development, testing and training environments. Production hosting for customers does not.
Does building an AI product qualify for R&D relief?
Only if the work advanced AI or computer science itself, such as new training methods or architectures. Using a commercial model through its API to build a product is usually routine development.
Can testing and QA time be claimed?
Testing that is part of resolving the uncertainty, such as experiments to see whether a new approach works, can qualify. Routine testing of finished features does not.
Can open source contributions qualify?
They can, if the work was part of your R&D project and your company bore the cost.
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