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R&D claims for a digital agency

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by James Holloway Agency Partnership Director

We work with hundreds of agencies around the UK and are amazed at the number of agencies who would be entitled to, but not claiming the governments Research and Development (R&D) tax reliefs.

Now we are not accountants by any means, but have advised/helped partner agencies on how they can take full advantage. Most companies and especially digital/web agencies spend considerable resource and monies on research and development, it’s part the parcel of running a business.

If this R&D is considered ‘innovative’ and advances knowledge in your particular field, then you have a claim!

Note this advancement needs to be tangible, reading books or researching into a company for a pitch probably won’t cut it, but for example; if you made a CSS framework or JavaScript tool etc, this would!

The best way to go about your R&D claim (in our non-accountant opinion 😊) would be:

1. Speak to your team

If you sit down with your whole team you would probably find that you have completed numerous projects where the above is applicable, so make a list of all relevant projects and these will form the basis of the claim.

2. Report on them

You will need to write a report on each project/item you wish to make a claim on. The report doesn’t need to be pages and pages, 2-3 pages would be sufficient as long as each below point is adequately answered and explained:

  1. What was the scientific or technological advance sought?
  2. What were the scientific or technological uncertainties involved in the project?
  3. How and when were the uncertainties actually overcome?
  4. Why was the knowledge being sought not readily deducible by a competent professional?

You should answer these questions for each project/item you wish to make a claim on.

3. Add in your costs

Whilst working on the project, you would have incurred costs from your team working on it. This would usually just involve your teams’ wages (those who worked on it), but could also include any expenses via travelling, resources etc.

These costs will be central to the claim so need to be worked out carefully, we usually gage it from:

  1. Who worked on it (could be multiple people)?
  2. How long did they spend on it (hours/days) (x)?
  3. How much do they cost (their salary and wages) (y)?
  4. Costs would then be worked out by x multiplied by y

The costs should then be added to the report, again specific to each project.

Now you have your reports, you will need to prepare them and submit for HMRC, this shouldn’t take your accountant long (as we have done all the hard work creating the above report) and costs can be gaged relative to how much you are claiming back (i.e. if your accountant want 1k to prepare, but the value of the relief will be 20k – then I would consider this a good deal).

Some companies will charge you (a lot) to prepare the initial reports for you, but they are not needed, as they can only use the information you provide anyway.

If you need any help with R&D and how your agency can get the most out of it, you can read more via https://www.gov.uk/guidance/corporation-tax-research-and-development-rd-relief and https://www.gov.uk/guidance/corporation-tax-research-and-development-tax-relief-for-small-and-medium-sized-enterprises, or get in touch and we will be happy to offer our insight and advice.