R&D Tax Credits for Insurance

R&D Tax Credits for Insurance

Background

Insurance companies, like many others within financial services, are often undertaking large Software Development projects to develop new and improve existing systems.
Often driven by new commercial or regulatory requirements, the types of changes required to modify legacy systems and integrate systems together that were never previously designed to work together are the types of project that typically qualify for R&D Tax Credits.

Eligibility Criteria

Main article: Eligibility Criteria
For an Insurance project to qualify for R&D Tax Credits, it must adhere the Department for Business, Energy & Industrial Strategy (BEIS) guidelines that define R&D for Tax Purposes.
The qualifying criteria apply to all fields of Science and Technology rather than just Insurance. Unfortunately, this means that these guidelines are very abstract and we find that in some cases it can be non-obvious how to apply these to Insurance projects. They state:

Technological Advance in Insurance

Insurance being a business, rather than a Technological sector, means that the Advance must be relative to the current industry baseline within Technology (or more specifically Software Development). We see that a significant proportion of companies often go wrong with Insurance claims when they baseline their Technology just against Insurance functionality (e.g. a system that can deal with Solvency II requirements). Hence, the Advance can't be that the company is applying Technology for the business needs but rather it needs to be a Technological Advance versus the baseline of software development knowledge and capability.
The industry baseline often sounds like a high hurdle to many competent professionals, but, companies working on implementing Solvency II requirements into an existing platform may need to fundamentally rewrite existing frameworks, introducing new uncertainties around extensibility and performance - the types of challenges that would qualify as R&D for Tax Purposes.

Technological Uncertainty in Insurance

We have seen many forms of Technological Uncertainty on Insurance software projects. For example, it could be where the competent professional/s are uncertain how to achieve the Technological solution in practice or where there are several ways to develop the desired security of the Insurance software, but each way may have potential pitfall for performance, stability and extensibility.
How to design and develop the Technology to take into account each of these would bring about the Uncertainty.

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