Software development qualifies for R&D tax relief when it seeks an advance in the underlying technology, not just a new product built with existing tools. That distinction excludes a large share of commercial development work, and HMRC applies it strictly. This page sets out where software claims stand up, where they do not, and what the relief is worth when they do.
When does software development qualify as R&D?
When a competent software professional, armed with published knowledge and established techniques, could not readily resolve the technical problem you faced. Qualifying work typically involves:
- Algorithms or data structures developed because published approaches cannot meet the constraint set: scale, latency, accuracy, concurrency.
- Processing data at volumes or speeds where established architectures demonstrably fail, and the route forward is unproven.
- Integration where the combined behaviour of systems is genuinely uncertain and cannot be settled from documentation or vendor knowledge.
The statutory test is an advance in the field of science or technology. Work can be new to your company, commercially valuable and technically demanding, and still not qualify. Our guide to what counts as qualifying R&D covers the test in full.
What software work does not qualify?
Most of it, honestly. The following are routine development, however skilled:
- Building applications with established frameworks, languages and APIs used as intended.
- Configuring or customising existing platforms.
- User interface and user experience work.
- Replicating functionality that is well understood in the field, even if it is new to your business.
- Routine testing, debugging and maintenance.
Where a genuinely qualifying core sits inside a larger commercial build, the project boundary matters. The claim covers the work that resolved the uncertainty, not the whole product, and drawing that boundary carefully is what keeps a software claim defensible.
Why does HMRC guidance matter so much for software claims?
Because software is where HMRC has concentrated much of its compliance effort, and its guidance is specific about the difference between advancing software technology and using it. HMRC checks roughly one in six R&D claims. The ones that fail tend to be written in product language, listing features rather than uncertainties. A claim that follows the guidance reads differently: it names the field, states what was already achievable, and records the experiments. Our page on HMRC R&D enquiries covers what happens when a claim is checked.
What records does a software claim need?
Better ones than most development teams keep by default, though rarely more than good engineering practice produces anyway. Every claim is made through the company tax return with an Additional Information Form describing the projects, so the technical account has to exist and has to hold up. Useful records include:
- The technical lead’s statement of the uncertainty at the outset, and why existing approaches were insufficient.
- Tickets, design documents or architecture decision records showing the approaches tried.
- Benchmark and test results, including the failures.
- A sensible basis for apportioning staff time between qualifying and routine work.
Version control history is often the most persuasive evidence a software company has: it timestamps the iterations and shows the dead ends that a tidy retrospective write-up would hide.
What about machine learning and AI?
AI development raises the same test with different facts, and we treat it separately. See when machine learning development qualifies as R&D for the field-advance analysis, and our AI and robotics sector page for the wider claim picture.
What is a software claim worth?
Under the merged scheme, £100,000 of qualifying spend gives a £20,000 gross credit: £15,000 net at the 25% corporation tax rate, £16,200 at the 19% rate or for loss-making companies. Loss-making SMEs whose R&D expenditure is at least 30% of their total expenditure can instead claim up to £26,970 on the same spend through ERIS.
Qualifying costs include apportioned staff time, cloud computing and data licences, and payments to unconnected subcontractors at 65%, subject to the UK-only rules on where the work is done. Grant funding no longer reduces relief under the current schemes; the position is explained in grant funding and R&D tax relief. The claim value calculator gives an estimate on your own numbers, and the ERIS intensity calculator works the 30% test.
A measured word on our approach
Software claims built on weak foundations were a large part of the mis-selling era, and they remain a focus of HMRC’s checks. We would rather tell you a project does not qualify than file a claim that will not withstand scrutiny. LimestoneGrey is a firm of chartered tax advisers and chartered accountants specialising in R&D tax relief regulated by ICAEW; every claim is signed off by a chartered adviser, and enquiry support is included as standard. If an earlier adviser filed software claims you are no longer comfortable with, we can review the position, and where HMRC has already opened an enquiry we can take over the defence.
If you want an honest view on whether your development work qualifies, talk it through with a chartered adviser.
Written by Matthew Jones ACA CTA. Last reviewed July 2026.