Business Management / Finance

Digital marketing R&D: Is your business owed tax credits?

Chester Avey

Updated: Dec 19, 2023 · 4 min read

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tax credits marketing research and development

Digital marketing businesses could be missing out on research and development (R&D) tax credits. If your company operates in the field of digital marketing you might not be aware that you could be able to claim R&D tax credits against the costs of carrying out some of the work that you do. So, why are businesses missing out?

The problem lies in the fact that many people and organizations still think of R&D as something that only applies to scientific businesses or industrial engineering scenarios. However, the truth is that R&D is much broader than that. No one in your company needs to be wearing a lab coat for the work you do to count as R&D—and make you eligible for tax relief. This is where digital marketing businesses could be claiming.

Getting R&D tax relief is much easier than you might assume. Some businesses miss out because they think that making a claim will be too complicated. But the benefits of making a claim can be huge, and there's no reason to feel overwhelmed.

So here we take a look at whether your digital marketing business could claim R&D tax credits.

The basics: What are R&D tax credits?

In the United Kingdom, R&D tax credits are a relatively broad form of tax relief designed to encourage businesses to innovate. Ultimately, it means that if your business invests in innovative projects, you can claim tax relief on some important costs such as staff, software, workplace, and much more. This can be claimed as long as the business is a limited company, and is spending these costs on new product developments or advances that benefit the industry as a whole.

So, as long as this is something that your digital marketing business is doing, you can claim tax relief. It's worth noting that there is nothing to say that the work needs to be successful in what it's attempting to do. It's enough to attempt to solve a problem—not just come up with the solution.

What qualifies as digital marketing R&D?

It's important to point out some of the limitations of claiming for R&D tax relief. And the first issue is a crucial distinction to make between the idea of creative innovation and technical innovation. A great deal of digital marketing work requires daily creative innovation—but this is not eligible for tax relief.

If you want to make an R&D tax claim you'll need to be able to show technical innovation. Thankfully this can take on a number of forms such as creating an algorithm to improve a piece of software or writing code that allows you to provide SaaS (software-as-a-service) to clients.

This innovation can take place across any aspect of digital marketing, whether you specialize in search engine optimization, virtual reality, or artificial intelligence.

What about the Patent Box scheme?

Another interesting form of tax relief for R&D comes in the form of the Patent Box scheme. According to R&D tax specialists Wellden Turnbull, this is a voluntary scheme that “allows companies to pay less tax on income derived from patents." In this form of tax relief, it's encouraged that businesses should innovate and then patent those innovations.

From this, they can reduce the amount of tax that they pay when they make income using these patented innovations. This can certainly apply to digital marketing businesses, and it should definitely be looked into.

How to make an R&D tax relief claim

When you come to make an R&D tax claim, you will need to be able to show that you are innovating. There is government guidance here that explains that as a part of your application, you need to show:

  • You looked for an advance in technology
  • You were forced to overcome uncertainty
  • You made attempts to overcome the uncertainty
  • This was work that others in your industry could not easily do

Final thought

It's a great idea to work with specialist accountants with specific experience in dealing with R&D tax claims. They can help your digital marketing business understand what you can make a claim on, and optimize the claim to ensure you are getting what you are owed.

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