What counts as R&D in FinTech?
FinTech is a cornerstone of the UK economy, driving innovation, improving access to financial services, attracting significant inward investment and helping to strengthen the UK’s position as a leading global financial center.
Whether developing proprietary payment platforms, enhancing fraud detection capabilities, automating compliance processes or applying artificial intelligence to financial services, many fintech businesses undertake activities that may qualify for R&D Tax Credits.
Across our FinTech portfolio we see many software and technology-led businesses investing heavily in R&D activity. Specific areas we’ve assisted our clients to claim in include:
- Payment rails,
- asset management and lending platforms,
- digital banking infrastructure and integrations,
- blockchain/web3 systems,
- cybersecurity, and,
- (of course) AI and its application to financial services.
How the schemes work
Under the R&D tax relief regime, eligible companies can claim relief on qualifying expenditure such as staff costs, certain subcontractor costs, software, cloud computing and data costs directly linked to R&D activity. Relief is claimed through the Corporation Tax return and may reduce tax liabilities or generate a cash credit. As a rule of thumb, claimants can expect approximately a 15% return on their qualifying investment in R&D, though for certain small, high R&D intensity companies, this can increase up to 27%.
Key considerations for founders
Make sure your team maintains clear records. The R&D claim is a post year-end activity, so you could be asking your team what they were working on 12-18 months ago. Key points to record for each project would include:
- technical risks and objectives,
- time and resources attributable and,
- a structured timeline of activity throughout the year.
Key considerations for Finance Directors
Maintaining good project management records and budgets will make your life much easier both at year-end and as you prepare cashflow forecasts throughout the year. The emphasis is very much on leveraging the data your existing systems and processes capture, whether that’s a capitalisation exercise you already run, making sure the right P&L codes are setup or KPI monitoring you have in place. Key points to focus on for finance leads include:
- tracking costs throughout the year,
- making sure arrangements with contractors evidence the R&D activity you’ve engaged them for and,
- adhering to the relevant filing deadlines (particularly the requirement to notify HMRC you want to claim for a period at year end).
HaysMac’s role
HaysMac has a long-standing track record of supporting businesses across the FinTech ecosystem, from early-stage start-ups and scale-ups to established fund managers and institutions. We understand the unique challenges faced by FinTech businesses and have a wealth of experience supporting across the FinTech lifecycle, from fundraising, through regulatory compliance to international expansion and IPO/Exit. Our multidisciplinary team provides a full range of advisory, tax and accounting services tailored to the sector, helping management teams and investors make informed decisions at every stage of the business lifecycle.
This includes specialist R&D tax relief support, where we work closely with founders, finance teams and technical leads to identify qualifying activities, prepare robust claims and setup processes to capture qualifying activities and costs moving forward.
If you are looking for an R&D specialist who understands the extensive innovation that FinTech businesses bring to the UK economy, then reach out to our team. Whether it’s your first claim, or your tenth, we are here to support.
