Three kinds of cost, in practice: software licences used for R&D work; data licences; and cloud computing services directly attributable to the R&D — remote storage, hardware facilities, operating systems and the software platforms used for testing, modelling, simulation or data analysis. What matters is not what the software is but what it was doing: the cost has to relate to resolving the scientific or technological uncertainty, which is why general business software, CRM systems and standard commercial hosting sit outside a claim however necessary they are to running the company.
What counts, and what does not
HMRC’s cost guidance treats these as two categories rather than one. Software covers licence fees for software used for R&D, plus a reasonable share of the cost where software is only partly used in R&D activities. Data licences and cloud computing form a separate category, claimable for accounting periods beginning on or after 1 April 2023, which covers every claim under the current schemes. The definitions are statutory: a data licence is a licence to access and use a collection of digital data, and cloud computing services include access to, and maintenance of, remote data storage, hardware facilities, operating systems and software platforms — remote being the operative word, because a company running its own servers is buying no service, and the set-up costs may be capital. One restriction is easily missed: data and cloud costs attributable to qualifying indirect activities cannot be claimed, a carve-out unique to these two categories; software, consumables, staffing and externally provided workers can all be claimed on qualifying indirect activities. One exclusion and one definitional gap are also worth knowing: obtaining a contractual right to sell the data onward, or to publish or share it beyond what the R&D needs, disqualifies the cost even if the right is never exercised; and data the business gathered itself is not a data licence — though the staff costs of gathering it may qualify as staffing.
Applied to a real ledger, the line usually falls between the environment where the R&D happened and the environment where the business runs. Compute spent on training runs, simulation, testing an unproven architecture or processing a licensed dataset for the project belongs in the claim. The production cluster serving live customers does not, and neither does the CRM, the accounting package or the everyday collaboration suite, not because they are unimportant but because they were not resolving anything uncertain. Our software sector page covers how this plays out where compute is a material cost alongside people.
Mixed use is where the figure is won
Very few licences or platforms are used exclusively for R&D, so most of the work is apportionment. Where a cost serves both the R&D and the rest of the business, include the R&D proportion on a justifiable basis and keep a note of what that basis was. HMRC’s guidance on software is proportionate: used almost exclusively for R&D, a high percentage is reasonable; mostly used elsewhere, a much lower one. It has indicated the same pragmatism for data and cloud, accepting a reasonable apportionment on a documented basis such as staff hours, licence counts or storage ratios. What will not survive a check is a percentage with nothing behind it.
Cloud costs are unusually well suited to evidencing, because the billing data already exists. Project-tagged resources, per-environment billing and usage records support an apportionment line by line, and they were created while the spend was happening rather than assembled afterwards. Where that granularity does not exist, a documented estimate tied to something real, such as the period a workload ran or the share of an environment given over to testing, is worth considerably more than a round number. HMRC checked around one in six claims in 2023-24, its latest published figure, and cost apportionments are among the first things a check tests.
How it lands on the claim
On the Additional Information Form the categories are finer than most finance ledgers. Software, data licences, cloud computing and consumable items are four separate cost heads, each requiring its own figure, alongside staffing costs, externally provided workers, clinical trial payments and contractor payments. The split was tightened in October 2024, when software and consumables stopped being one combined head, so claims prepared on the old grouping do not map across. Costs therefore need splitting on the right lines before the form is drafted, and reconciling to the figures in the return. Our AIF guide sets out the form section by section, and the qualifying costs guide covers every category together.
If your cloud bill is substantial and nobody has asked which parts of it were R&D, that is usually value sitting unclaimed in the ledger. We will tell you which parts qualify and which do not.
Written by Matthew Jones ACA CTA. Last reviewed July 2026.
Sources
- Check what R&D costs you can claim — software licence fees and the reasonable-share basis, and data licence and cloud computing costs for accounting periods beginning on or after 1 April 2023.
- CTA 2009 s1125 and s1126ZA — the statutory definitions including “remote”, the qualifying-indirect-activity carve-out and the onward-sale and publication exclusions.
- CIRD82100 and CIRD135000 — the category introduced by Finance (No.2) Act 2023, the paid requirement, and HMRC’s treatment under the current schemes.
- SI 2023/813, Schedule 2 — the AIF cost heads, as substituted from 2 October 2024.
This page describes the rules as they stood at the review date above, as general information rather than advice on your circumstances. For how that distinction works, see our terms; for an answer on your own facts, talk to us.