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R&D Claims made in the Financial Services Sector

LinkStep have strong experience in the financial sector and a solid capacity for IT technology claims covering retail, investment banking and insurance services.

People are often confused and look for software development that is only “new” or “unique” – this is NOT the right approach.

Software programmers not in the UK?
Furthermore, the development activities do not need to have occurred in the UK. This point cannot be overstated, as accountants and other financial advisors often over look this point. The question is whether or not the costs have been incurred in the UK by the company wanting to claim.

What are the characteristics of qualifying activities?
In most cases with software development claims, the qualifying activities do not involve the creation of a completely new software system that has been developed from first principles. Instead, it invariably involves taking an ‘off-the-shelf’ product, being the closest match to their requirements, developing this further and integrating the result into a wider systems architecture. Qualifying activities can also involve adapting or improving an existing system to operate in a completely different or new way.

It is often the case that aging legacy platforms that cannot be simply ‘turned-off’! Companies are forced to integrate these systems with the latest development, often where no standard integration protocols exist. Furthermore, there can be issues with data management; data from the legacy systems often needs to be shared with new systems but the data structures involved are incompatible. The development of tools and techniques to overcome these issues would also qualify as R&D for tax purposes.

The definition of R&D-for-tax-purposes is that you have an objective that essentially was not straight forward to achieve. The caveat in the guidelines states:

“Scientific or technological uncertainty exists when knowledge of whether something is scientifically possible or technologically feasible, or how to achieve it in practice, is not readily available or deducible by a competent professional working in the field.”

The following is a list of some activities that could potentially involve qualifying R&D activities:

  • Integration of legacy systems
  • New data processing techniques, covering collection, cleansing, manipulation and analysis; distribution and retrieval of price and company fundamental data; defining or working with new or emerging data models and metadata standards; integration with third party content.
  • Development of trading algorithms, proprietary analystics and financial models.
  • Simulation environments
  • Risk control systems
  • Bringing systems onto a common platform without disrupting functionality
  • Security/communication protocols
  • Fraud detection and prevention systems
  • Data encryption
  • Development of internal systems/tools for mid and back-office activities
  • Development of transparent and interrogatable systems for reporting purposes
  • Development of systems to integrate seamlessly with third party systems
  • Data provision and cleansing systems
  • Spreadsheet auditing technology for many layered and dynamic managerial spread sheet systems
  • Financial databases collating and interpreting underlying streamed data sources
  • Algorithm development for investment strategy, portfolio management and execution with minimal slippage
  • Call centres and network backbone infrastructures
  • “Hub and Spoke” topology, middleware architecture developed with the creation of a Global Wholesale Mark-Up Language, based on XML
  • Imaging and data processing methods involving storage, reception, transmission, capture, manipulation, authorisation and access
  • Wholesale Data Warehouse (WDW) with a web channel for customer access to support a diverse range of reporting
  • Machine learning techniques for market prediction
  • Hardware development