This week we begin a two-part feature exploring R&D Tax Credits, in association with Jumpstart.
On Thursday we’ll be looking at the broader picture across the North and the UK as a whole, but for Part One today, we’ve spoken to organisations to understand more about the scheme and how businesses in the creative sector can benefit.
Think “research and development”, and the image that often springs to mind is that of a white-coated lab technician peering into a microscope.
But the reality is that any company investing in the improvement of a product or service, from software companies to breweries to SEO agencies, is involved in R&D.
And with that comes a significant tax relief opportunity that many are missing out on – to the tune of £1billion in unclaimed tax credits every year.
Ian Wolfendale, client engagement manager at R&D tax credit specialists Jumpstart, says the awareness problem is particularly acute in the creative sector.
“Our experience in over eight years and thousands of R&D tax credit claims is that creative businesses have yet to properly embrace the scheme,” he said.
“There remains a perception that R&D tax credit eligibility is confined to companies with R&D labs full of people in white coats.
“The truth is that it R&D is going on across many industries and sectors – any company that spends money trying to improve a product or service through a technological advance, using qualified staff and appropriate project controls, and where there’s an element of doubt about the project’s success, is likely to be eligible.”
What companies are eligible for relief?
Introduced by the Government back in 2000, the R&D Tax Relief Scheme was invented to encourage innovation and global competitiveness – qualities, in our post-Brexit world, that are perhaps more imperative than ever.
So, if all this money is available (the average annual size of an SME claim in the UK is almost £50,000), how do companies – agencies, production companies, animation studios and the like – go about getting their hands on it?
As there are two schemes, the first question to ask is simply one of size: if your company has under 500 people and revenues of less than €100m or balance sheet assets of less than €86m, then you’ll be considered to be an SME. Everyone else qualifies for the RDEC (Research and Development Expenditure Credit) scheme.
The second eligibility question, as alluded to above, relates to the nature of your company’s work: essentially, if you’re taking a risk by innovating, improving or developing a process, product or service, then you can qualify for R&D tax credits.
In most workplaces, especially in the digital and creative sector, that innovation will be spread across roles or departments rather than siloed into a neatly identifiable R&D division. It’s likely, therefore, that R&D activities will be intertwined with the work of a web developer, product designer, technical director or chief marketing officer.
£280,000 relief claimed
Take one UK-based company that specialises in extending the capabilities of SAP software to better meet clients’ needs.
It sought a means of transferring data from multiple systems, thereby increasing SAP system performance, so embarked on producing a rapid integration framework that was separate from the SAP application.
The company later successfully claimed relief totalling over £280,000 – a significant amount for a company with a turnover of £1.9m.
Another £3m-turnover company specialised in the handling of large amounts of data for commercial, medical and government services. It developed a record system that could retrieve massive volumes of data at user responsive speed, with throughputs and robustness that far exceeded industry standards.
A claim, also totalling £280,000, was successfully made under the R&D relief scheme.
And one Northern-based digital agency told us its claim had taken around two months to come to successful fruition, and the cash has been reinvested back into the company in staff and new products and services.
On Thursday, we’ll be looking at some of the broader trends in relief claims across the UK, and digging more deeply into the kind of work that will make companies eligible.
One reason many businesses are put off claiming is that HMRC’s guidance on R&D tax credits runs to several hundred pages. For more information about how the specialists at Jumpstart can help and minimise the demands on your company’s time, visit Jumpstart.
