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In comparison to other industry sectors, software products and technology have a relatively short lifespan, and the rapidity of change makes it vital for software companies to continue to invest in research and development.
A generous return on investment from the Government’s R&D tax relief scheme will help them to continue to innovate, but commercial projects must meet HMRC’s criteria.
The Software industry is part of the larger sector of computer science and information technology and has four main subdivisions including software engineering, open-source, system services and SaaS (Software as a service).
With almost universal use of the internet, Innovations in Software or programming engineering are in high demand. Key factors such as advances in cloud computing technology and IT infrastructure are driving the growth of research and development within the software industry.
R&D TAX CREDITS
One of the fastest-growing areas of innovation is artificial intelligence technology, with research aimed at producing new and better machines which can work intelligently to perform complex tasks. Industry sectors such as healthcare, travel and education have identified artificial intelligence as one of the biggest new trends for assistance with services or experiences.
A research and development project and its funding should be a key factor of good business planning and strategy. Research focuses on experimenting with technologies and ideas to develop a new solution for a specific problem, with no predetermined deadline and where nobody can predict the end result. It should aim to resolve technological or scientific uncertainty.
However, HMRC’s criteria relating to the eligibility of software research projects for R&D tax relief are fairly complex with several ‘grey’ areas. This has meant that many companies investing in software development have not made successful claims for R&D tax relief