What HMRC’s own guidance says qualifies
The manual’s examples of qualifying territory are usefully concrete. Implementing a novel algorithm that represents a significant increase in overall capability in the area of software qualifies. So does developing new or improved data architectures that cannot be achieved with readily deducible solutions, pushing beyond the boundaries of existing, readily available database engines. And the tool route matters for R&D-heavy businesses. Where software is created or adapted solely as a tool for direct use in a larger R&D project, that development qualifies as part of the project.
The same guidance draws the floor. Customisation such as configuring existing software to a company’s own requirements is unlikely to qualify, because it is generally already within the capability of the existing software. And every software claim should be tested against one sentence from the manual: the development of a software product does not represent an advance in science or technology simply because it uses software technology in its creation.
HMRC’s four case studies, compressed
The manual’s case studies (CIRD81980) are the closest thing to precedent short of tribunal. Each splits a real project into qualifying and non-qualifying parts:
- Cloud migration. Evaluating and selecting middleware: not R&D. Building a bespoke internal certificate-authority server where available products could not meet the constraints: qualified.
- Machine-learning fraud detection. Choosing between learning paradigms: not qualifying. The novel artificial-neural-network implementation: qualified.
- Video streaming. The basic streaming server and client: no technological uncertainty, so not qualifying. The responsive UI and aesthetic work: expressly non-qualifying. Frame-level integrity checksumming beyond existing capability: qualified.
- Computer-vision authentication. Selecting an AI platform: not qualifying. The feasibility research on the neural-network approach: qualified.
The pattern across all four is the same. Selection, assembly and presentation fall outside. The qualifying work is the part where existing capability genuinely ran out, and it is always a subset. Where the project itself is AI work (model development, training pipelines, fine-tuning), the same boundary has its own wrinkles, covered in AI development and R&D eligibility.
Sector pitfalls we would check first
- Agile vocabulary inflating the claim. Sprints “experiment” and tickets “spike”, but HMRC’s website-modernisation example kills routine adaptation of existing techniques regardless of vocabulary. The test is the field’s capability, not the methodology.
- The whole-team apportionment. Product managers, designers and QA qualify only where their work directly contributes to resolving the uncertainty or is a genuine qualifying indirect activity. HMRC’s examples treat UI and aesthetic work as non-qualifying in terms.
- Third-party and platform work. Development contracted out in either direction engages the entitlement rules on subcontractors. Overseas dev teams engage the overseas restrictions. Both rule sets moved sharply in 2024.
- Data and cloud costs missed or overclaimed. Compute for training and testing within the uncertainty window can qualify under the data-and-cloud category; production hosting cannot. The category rules are on qualifying costs.
Frequently asked questions
We build complex products with modern stacks. Does that qualify?
Complexity and modernity are not the test. HMRC's guidance says directly that a product does not represent an advance simply because software technology was used to create it. What qualifies is pushing the field's capability, a novel algorithm, an architecture beyond readily available approaches, not assembling known components well.
Does AI or machine learning work qualify automatically?
No. In HMRC's own case study, choosing between learning paradigms was not qualifying, while implementing a novel neural-network approach to a problem the standard tools could not solve was. The uncertainty must sit in the science or technology, not in which product to pick.
Can internal tools and platforms qualify?
Yes, in two ways HMRC recognises: software developed as a tool for a larger R&D project qualifies as part of that project, and internal development can qualify in its own right where it faces genuine technological uncertainty, as with the bespoke certificate-authority server in HMRC's cloud-migration case study.
How much of a development project typically qualifies?
HMRC warns that most commercial development projects will not qualify in their entirety, and that only the parts meeting the definition count. Honest software claims are usually sub-projects: the uncertain core, not the whole roadmap.