When a company develops software for general and administrative functions, such as for financial management, human resources, or support services, that software needs to be considered innovative in order to qualify for the R&D Tax Credit. This innovation test is a high threshold in order to qualify for the credit. For example, these types of software cannot be commercially available in order to qualify.
However, there are two typical situations when software developed for a company's operations does not need to be considered innovative in order to qualify for the R&D Tax Credit and, as a result, will very likely qualify for the credit.
First, when the software is developed to facilitate the viability of business interactions with third parties, such as executing banking transactions or tracking deliveries. And, second, when the software is developed to function as a software portal that enables third parties to execute actions on the taxpayers' software system. You see this a lot nowadays with all types of companies, from banks and brokerage firms to retailers that have functional websites and phone apps that interface with their clients and customers.
The development of the underlying software for these websites and apps will very likely qualify for the R&D Tax Credit – an often-overlooked opportunity. If you think this could apply to your company or to your clients, please contact Engineered Tax Services at (800) 236-6519 for a free assessment.