Important: This guide provides general information about HMRC R&D Tax Credits. It is not tax advice. You should consult a qualified R&D tax specialist or chartered accountant before making a claim. ClickMasters can introduce you to our specialist R&D tax partners if required.
Does My Software Project Qualify for R&D Tax Credits?
Real-World Example: A UK fintech company builds a custom KYC identity verification system. Standard identity check APIs (Onfido, Jumio) are available, but the company develops a novel approach to combining multiple data sources with custom risk-scoring logic to reduce false positives by 60%. The custom algorithm development qualifies as R&D. The standard API integration work does not.
R&D Tax Credit Rates — SME Scheme vs RDEC (2025)
| Aspect | SME Scheme | RDEC (Large Company) |
|---|---|---|
| Eligible companies | SMEs: <500 employees, <€100M turnover or <€86M balance sheet | Large companies + SMEs on subsidised projects |
| Enhancement rate (post-Apr 2023) | 186% deduction (uplift of 86%) | Merged scheme: 186% deduction from April 2024 |
| Loss-making: payable credit | 14.5% of "surrenderable loss" (R&D intensive: 27%) | Merged scheme: 16.2% above-the-line credit |
| Profitable company (approx effective rate) | ~21.5% of qualifying spend | ~16.2% of qualifying spend |
| R&D intensive SME rate | 27% credit if R&D spend >30% of total spend | N/A — use merged scheme |
| Connected companies | Must aggregate group R&D | Part of group relief calculations |
| Subcontracted R&D | Can claim on staff costs + 65% of subcontractor cost | Claim on staff costs, some subcontractor costs |
| Claim deadline | 2 years after end of accounting period | 2 years after end of accounting period |
Note: R&D tax legislation changed significantly in April 2023 (SME rates reduced from previous levels) and again in April 2024 (merged scheme introduced). Always verify current rates with an R&D specialist before making a claim.
What Costs Can You Claim?
| Cost Category | What's Included | ClickMasters relevance |
|---|---|---|
| Staff costs | Salaries, NI, pension contributions for employees directly engaged in R&D | Core ClickMasters developer time on qualifying work |
| Externally Provided Workers | Agency/contractor costs at 65% of invoice value (SME scheme) | Applicable where ClickMasters is subcontractor to your R&D project |
| Software & consumables | Licences and software directly used in R&D (not general office software) | AWS/Azure infrastructure costs, specialised tools |
| Cloud computing (from April 2023) | Cloud compute, storage, and data used for R&D | AWS/Azure costs for development environments, ML training |
| Subcontractor costs | 65% of payments to subcontractors for qualifying R&D (SME scheme only) | If you commission ClickMasters to perform R&D activities |
| Prototype costs | Materials consumed in R&D prototyping | Less common for software but may apply to IoT/embedded projects |
How to Document Your R&D — The Records HMRC Requires
ClickMasters' Approach: We include R&D documentation as a standard deliverable on all qualifying projects. This includes: a technical narrative covering qualifying uncertainties and approaches, sprint-level records of R&D activities, and a summary formatted to support your tax claim. This is unique in the UK software agency market — no other agency we know of does this as standard.
Step-by-Step: How to Make an R&D Tax Credit Claim
Step 1: Step 1: Assess Eligibility
Review your software projects for qualifying activities. If you've been building anything involving genuine technical uncertainty, you likely have a claim. Go back up to 2 years (to the end of your last two completed accounting periods).
Step 2: Step 2: Identify and Quantify Qualifying Costs
Work with your finance team to identify all costs attributable to qualifying R&D activities: staff time, subcontractor invoices (65%), software licences, cloud costs. This step requires the technical narrative to apportion costs correctly.
Step 3: Step 3: Prepare the Technical Narrative
This is the hardest part. Describe each R&D project: the advance sought, the uncertainties, the approaches tried, the outcome. ClickMasters' project documentation is your starting point — we can provide a technical summary formatted for this purpose.
Step 4: Step 4: Complete the CT600 R&D Supplementary Pages
Your accountant or R&D tax specialist completes the R&D section of your Corporation Tax return (CT600). First-time claimants must also file an online claim notification through HMRC's R&D service within 6 months of the end of the accounting period.
Step 5: Step 5: Submit and Respond to Any HMRC Queries
HMRC may accept your claim, request further information, or open an enquiry. Strong contemporaneous documentation significantly reduces the risk of an enquiry. Most straightforward claims are processed within 28–40 days.