Software companies

Software claims turn on the technical case. The test for qualifying work asks what was uncertain and what was tried, and a description written from a feature list or a sprint log without talking to the developers can describe ordinary development as research.1Source 1The legal test for qualifying R&D: Internal Revenue Code section 41(d) (United States); Corporation Tax Act 2010 section 1138 and the Guidelines on the meaning of research and development for tax purposes, via HMRC CIRD81300 (United Kingdom); Taxes Consolidation Act 1997 section 766, via Revenue Notes for Guidance Part 29 and Tax and Duty Manual Part 29-02-03 (Ireland); Income Tax Act section 248(1) and CRA, "Guidelines on the eligibility of work for SR&ED tax incentives" (Canada); Income Tax Assessment Act 1997 section 355-25, via Department of Industry, Science and Resources, "Conducting core R&D activities" (Australia); Income Tax Act 2007 section LY 2, via Inland Revenue, "Eligible R&D activities" (New Zealand); Income Tax Act 1947 section 2 and section 14C (Singapore). More detail on your country page. The adviser's process, and the time it takes from your developers, is the first thing to price. A software company's claim also grows with its engineering headcount, which makes a cap worth asking for, and where its records are good, a claim can be prepared with less help than a first-time claimant expects, which makes the in-house question worth asking.

• Who will do the technical work?, and how many hours of developer time it takes
• How do you decide what qualifies?, with an example of development you would leave out
• Can we see the full claim before filing?, with the technical descriptions read by the developers
• How are your fees calculated?, with a worked example at next year's headcount

No one speaks to your engineers. You cannot see the claim before it is filed. Uncapped success fees on a claim that follows the payroll. Each can have a fair reason: a lead developer who wrote the descriptions, a review meeting you attended, a claim that will stay small. The green flag they talk to the people who did the work is the one to look for.

Capped fees suit a claim that grows with the team: on the shared example, 20% capped at $60,000 stops rising at a $300,000 claim. Software-assisted claims may appeal to a company comfortable with tools, and the page explains what the subscription does and does not include, in particular technical review. Hourly fees for a review of a claim your own team drafted can suit a company with good records. A contingent success fee suits an early stage company with little cash. Illustrative figures.

Sources

1. The legal test for qualifying R&D: Internal Revenue Code section 41(d) (United States); Corporation Tax Act 2010 section 1138 and the Guidelines on the meaning of research and development for tax purposes, via HMRC CIRD81300 (United Kingdom); Taxes Consolidation Act 1997 section 766, via Revenue Notes for Guidance Part 29 and Tax and Duty Manual Part 29-02-03 (Ireland); Income Tax Act section 248(1) and CRA, "Guidelines on the eligibility of work for SR&ED tax incentives" (Canada); Income Tax Assessment Act 1997 section 355-25, via Department of Industry, Science and Resources, "Conducting core R&D activities" (Australia); Income Tax Act 2007 section LY 2, via Inland Revenue, "Eligible R&D activities" (New Zealand); Income Tax Act 1947 section 2 and section 14C (Singapore). More detail on your country page.  Back