Tax credit specialist Jumpstart helps ecommerce businesses to claim valuable tax relief.
In his role as a technical analyst at Jumpstart, the UK’s leading research and development (R&D) tax credit specialist, Adrian Williamson is right at the coalface of the digital revolution.
Having previously pioneered revolutionary software for some of the UK’s biggest blue-chip companies and having researched human computer interaction and neural networks at university, he is now helping ecommerce businesses across the UK receive the support they need to bring new technological advances to market.
As a technical analyst, it is Williamson’s job to work hand-in-hand with ecommerce businesses from all corners of the UK that feel they are developing new technology on which they may be able to claim tax relief, saving them thousands, sometimes even millions on research and development costs.
“The R&D tax credit scheme is focused on rewarding companies for advancing technology that makes it very attractive to ecommerce businesses,” Williamson tells BQ. “However, because it’s a technically assessed scheme, you need technical expertise to judge where the advance is, the challenges the company has faced developing the technology and whether or not they’re developing something which is above the industry standard, which is where Jumpstart comes in.”
In order to claim R&D tax credits, as Williamson mentioned, businesses must be able to demonstrate to HM Revenues & Customs (HMRC) that the project or projects they’re including in their claim are truly aimed at advancing their field of science or technology beyond the existing industry baseline, meaning an advance on what’s currently available in the market.
So, if you’re a business with an ecommerce website or platform, you might well be eligible to apply for R&D tax credits, as Williamson explains: “If, for example, you’re using an ecommerce platform such as Magento 1 and you’re looking to upgrade to Magento 2 to get the benefits, you wouldn’t necessarily be able to claim simply for that.
“However, if you had a number of plug-ins that were now outdated and not compatible with the upgraded version of Magento, then you would have to start developing the technology yourself or with the assistance of your staff or even freelancers. This you would be able to claim for. It is a typical example of ecommerce development.
“Companies can’t just sit around for six months waiting for updates, they have to be proactive and innovative, especially if they want to deliver competitive advantage to their clients. The technology you’re investing in needs to be leading edge, responsive and engaging for customers whether it’s for business-to-consumer or business-to-business clients and it must make sure those people can access the goods and services that they need to get to easily.”
Another key theme that Williamson and the team have highlighted is the diversity of businesses now applying for R&D tax credits to help them develop new kinds of platforms. Whereas previously the ecommerce space was primarily focused on fast-moving consumer goods, businesses of all shapes and sizes are now operating in the space, selling anything from homes to bathrooms, furnishings and even online lending platforms.
“One of the things that we’ve seen happen in the ecommerce space recently is that we [the consumers] have gone from buying small goods online and bits and pieces from Amazon and eBay to shopping for kitchens and bathrooms,” he adds. “If you look at the major retailers for example in the kitchen market, you’ll see these very rich, online designer environments where you can design and visualise your kitchen using the products that are currently in stock at your local outlet.
“The development of the technologies behind these ecommerce offerings is very eligible as far as the R&D tax relief scheme is concerned. Hardware and software wise, you also need to ensure it works across a range of technologies that people may have in their home, as well as being fully integrated with back office systems to ensure fast and effective order processing and fulfilment for clients. These ecommerce systems are well beyond the traditional clothes and food ecommerce websites we all used for the first time 15 or 20 years ago.”
However, identifying technological advances that are above and beyond the industry norm is quite a complicated task, which is why Jumpstart has assembled a well-diversified team of highly-experienced technical analysts such as Williamson. The analysts work with businesses from a range of sectors all the way from finding out if they’re eligible to apply for R&D tax credits, through to preparation and submission of the claim.
For the Jumpstart team, including passionate techies such as Adrian, it is extremely rewarding to see their work pay off and to witness the positive impact tax relief can have in helping small and medium-sized enterprises (SMEs) invest more in R&D and transform not only a business, but an entire sector. “Typically, if we’re going out to see a client, we will prepare by looking at the information the relationship manager will have collected about the work that they do,” he says. “This means that, when we get there, we can ask all of the expert technical questions we need to straight away.”
“We usually meet with two parts of the company. Firstly, we meet the technical team, so we can discuss the projects the company has undertaken and familiarise ourselves with the technologies it has invested in. We will then produce a technical narrative on behalf of our customer to describe the activities they have undertaken, justifying why they are eligible for R&D tax relief. By working hand-in-hand with the technical team, we make sure we aren’t including costs for activities that are ineligible and are helping them submit a successful, but compliant claim.
“It’s my job to write the technical report to cover that material and then, following that, we work with the company’s finance team to ensure we gather all of the relevant evidence on the costs involved. As you can imagine for software in particular, the costs tend to be predominantly staff related for the most part. We then collate all the costs and ensure they’re treated correctly, which is another area of Jumpstart expertise. Then, we are ready to submit the claim and wait to see how much benefit they realise.”
Another area of ecommerce that companies often claim for, which many don’t realise is possible, is search engine optimisation (SEO) and pay per click (PPC) advertising technology. Due to the fact that the scheme is only applicable to technological advances and not marketing and commercial activity, companies can’t claim directly for SEO and PPC campaigns. However, they can claim for relief on projects aimed at advancing the technology that underpins performance gains in both SEO and PPC.
For example, Google and other search engines change their algorithms frequently and their guidelines are often ambiguous. In some cases, established techniques such as the use of keywords may fail to deliver the expected results and SEO specialists may have to experiment to find out what works while being mindful of those unpredictable and unexpected risks. This is where a claim could be made.
Williamson adds: “All of the work to build an ecommerce platform is a complete waste of time if your customers can’t find your website. We have to be quite careful here though as companies can’t claim R&D tax credits for marketing and commercial activities, it is strictly for investment made in achieving technological advancements.
“As a general rule, the day-to-day SEO and PPC activities do not qualify for relief – in these cases, practices are well established, and you will have a good idea of what works and what doesn’t. The projects most likely to be eligible are the complex and challenging campaigns, where you are required to come up with innovative solutions and where there is uncertainty about how effective it will be or whether it will work at all.”
If you’re an ecommerce business looking to apply for R&D tax credits however, it is worth bearing in mind that there are different schemes for SMEs and large companies. Companies claiming under the SME scheme can receive 25p of tax benefit for every £1 they spend on eligible R&D or receive a payable tax credit of up to 33.35p if they are in a loss-making position. While those claiming under the R&D expenditure credit (RDEC) scheme will receive up to 9p for every pound of qualifying spend.
These guidelines mean it can be more worthwhile for some businesses to apply for the scheme than some of their counterparts, however Williamson and the team are well aware of the guidelines and how to quickly identify whether or not it will be worthwhile for a company to progress with a claim.
He concludes: “It’s a case of ‘here’s a tax scheme, it’s very beneficial for companies, and you should find out all about it’.
Whether you research it yourself or come to a company like Jumpstart to get some professional advice, it’s worth seeing if you could be eligible.”
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