R&D Tax Credits: Practical examples of how creative businesses can be eligible for relief

David Prior's picture
by David Prior

This week we're running a two-part feature exploring R&D Tax Credits, in association with Jumpstart.

On Monday we learnt more about the scheme itself - and today, we dig a bit deeper into how creative businesses in the North can go about claiming some of the millions in unclaimed credits.

The R&D tax credits scheme is open to all companies, and in the last financial year SMEs claimed £800m from the total £1.75bn paid out to companies of all sizes

jumpstartLooking at SME claims for the period 2010 to 2014, we're able to build up a fairly detailed picture of the typical claimants.

Almost 30.7% originated from the Manufacturing sector, followed by the Information & Communication sector (25.7%), Professional, Scientific & Technical (19.4%) and Wholesale & Retail Trade (9.6%).

Geographically speaking, the data shows that the North has so far been slow to claim, certainly compared to the South. In the latest available figures, from 2013-14, 46.4% of UK claims emanated from London and the South.

Just 9.9% of claims came from companies in the North West, 6.8% from Yorkshire and The Humber and only 3.5% from the North East.

The amounts claimed by Northern companies have been rising comparatively more steeply however - up 240% in the North West during the period 2010 to 2014, 308% in Yorkshire and The Humber and 313% in the North East, the latter the highest figure anywhere in the country.

Maximising a potential claim

Don Galloway, director at Jumpstart, said there were genuine reasons for the disparity between North and South, such as the comparative lack of scheme publicity in the North and also the fact that some Northern companies had registered addresses in London.

But the growing tech and digital sector in the North should encourage a higher proportion of claims - and HMRC is also developing an online portal to make submissions easier.

Galloway said there were certain steps that companies embarking on an R&D project should put in place to ensure they maximised a potential claim.

These were project or activity logs to detail challenges and issues along the way; a list of staff working on the project with accompanying time-sheets; and a log of large project expenses.

Practical examples of R&D activity in the creative and digital sector

But what are the practical examples of activities that could make creative agencies and companies eligible for the scheme? Here are four:

  1. The challenge of video on mobile has spawned numerous projects that could be eligible for R&D relief The challenge of video on mobile has spawned numerous projects that could be eligible for R&D relief

    The need to… increase capability in response to consumer trends
    App developer, social media manager and user experience designer are just three examples of jobs that did not exist 10 years ago, but are now commonplace in digital agencies. This underlines the speed at which new trends become the norm in the industry and the need for agencies to embrace and develop new technology in order to match clients’ ever-increasing demands. A recent example has been the unprecedented increase in bandwidth requirements as high quality video has played a bigger role across devices. The challenge of improving the presentation of media on mobiles has resulted in lots of innovative ideas that could be eligible for R&D tax relief - and even if your project failed, it can still qualify.

  2. The need to… enhance user experience (UX) 
    With clients seeking increasingly complex data to measure and enhance user experience, many digital agencies are experimenting with new approaches and technology. These range from the tracking of eye movements, keystrokes and mouse usage to ensuring the UX is consistent across different countries. Meanwhile, in order to keep the UX in line with the latest technology, R&D is commonplace in platform developers’ attempts to keep up with new trends, such as the latest programming languages and the development of cross-platform applications.
  3. R&D Tax Credits: How creative businesses in the North are missing out on millions

  4. The need to… start considering more devices
    Numerous digital agencies have latched onto the ‘internet of things’ concept and this is sure to bring about many eligible R&D projects. Along the same lines, ‘second screen’ technology is expected to explode in coming years, bringing with it plenty of opportunities for innovative integration and marketing.
  5. The need to…continually make things faster
    In every possible way, digital agencies are striving to do things faster. Whether it’s their own ability to respond to developments and demands or improving the speed of web games, geolocation or communication between devices, the need for speed is escalating all the time. With many of the sharpest minds in the country working in digital media, improvements are continually being made - yet too many digital agencies still fail to turn these experiments into the financial returns they deserve.

The above examples are by no means exhaustive, but give some indication of the myriad ways in which creative businesses can be eligible for R&D tax relief.

The process of claiming is complex and can be time-consuming - for more information about how the specialists at Jumpstart can help and minimise the demands on your company's time, visit Jumpstart.