S,
http://www.hmrc.gov.uk/manuals/cirdmanual/CIRD81960.htm
However, on reading your post more carefully, now that I am no longer in a busy café, (and well done TW for automatically adding the acute accent!), I can see that you refer to the expenditure being incurred by paying a university to do the work, rather than your client's own employees?
See CIRD84200 for sub-contracted activities and the corresponding restriction in eligible expenditure.
Note also that normal grants reduce eligibility for R&D £ for £, but notifiable State Aid for a project kills an SME claim completely (but note only for that project) - although a claim is potentially still possible under the large company scheme. From memory TSB funding does count as 'notifiable' (although I am not certain) so care is needed here.
If the software is particularly innovative, it may potentially be "patentable" and therefore eligible for Patent Box treatment.
Regards,
Lambs