The Information and Communication Sector was second only to Manufacturing in numbers of R & D claims made, as revealed by HMRC’s latest R and D Tax Credit Statistics 2017 Evaluation Report. That’s 5,905 in total, 27.3% of all SME claims, and worth £385million. The average claim for SMEs in the Information and Communication sector is £65,199 – a few thousand above the overall average amount.
There has been an overall rise in R & D Tax Credit claims, which is great for innovation development across the board. It is possible that it is easier for businesses in the Information and Communication Sector to make claims because the language of the scheme includes specific ‘technology’ references.
But why aren’t more companies taking advantage of this amazing investment potential?
The answer to this question seems to be common to all industry sectors:
- Lack of knowledge about the R & D Tax Credit scheme or RDEC
- Not categorising business within this sector
- Misidentifying existing eligible activities
- Not being certain of which costs count towards R and D Tax Credits
Businesses in this industry sector
The definition of which business types belong in the Information and Communication category is decided by Companies House. They list 32 different sorts of businesses:
Section J Information and communication
- Book publishing
- Publishing of directories and mailing lists
- Publishing of newspapers
- Publishing of learned journals
- Publishing of consumer and business journals and periodicals
- Other publishing activities
- Publishing of computer games
- Other software publishing
- Motion picture production activities
- Video production activities
- Television programme production activities
- Motion picture, video and television programme post-production activities
- Motion picture distribution activities
- Video distribution activities
- Television programme distribution activities
- Motion picture projection activities
- Sound recording and music publishing activities
- Radio broadcasting
- Television programming and broadcasting activities
- Wired telecommunications activities
- Wireless telecommunications activities
- Satellite telecommunications activities
- Other telecommunications activities
- Ready-made interactive leisure and entertainment software development
- Business and domestic software development
- Information technology consultancy activities
- Computer facilities management activities
- Other information technology service activities
- Data processing, hosting and related activities
- Web portals
- News agency activities
- Other information service activities n.e.c.
Are you part of this list? If not, then check out the other R & D industry categories to see where your business does fit.
Misidentifying eligible R and D activities
When you are considering your innovative activities, you need to ask yourself the following questions:
- Are our developments taking something to the next level in our field? (“…make and advancement”)
- It is important that you are not applying something that exists elsewhere to your field for the first time.
- At the start of the project, did we feel that it could equally succeed or fail? (“…faced technological uncertainties”)
In other words, you don’t already know the answer.
- Is this innovation something that could be used across other sectors?
You have moved your field onwards, not just your own business.
Can an expert in the field easily resolve the problem?
You need to show that the experts working on your project are professionals in the field. They need to explain the “uncertainties” you are facing and perhaps evidence where others have tried, but failed, to resolve the issue.
Examples of R & D activities in Information and Communication sector:
- Software development: brand new and solving an existing problem
- Development of chatbots using AI
- Publishing books, mailing lists etc
- Data management
- Encryption and security
- Wireless network compatibility
- Search methods and search engines
- Hardware development
- App development
Any work that your company does to improve consumer experience (UX) by responding to consumer trends probably involves some kind of R and D work. There is also the increasing demand for working across a variety of devices and at ever growing speed that necessitate almost constant innovation to keep pace.
There are a number of costs that are considered eligible under the R & D schemes. For example, staff (including specific subcontractor work), consumables (including for creating prototypes) and software licenses.
You’ve got nothing to lose…
The R & D Tax Credit Schemes really are all good news. The very worst that can happen is that you discover that, for now, you have no qualifying expenditure. The best is £65,199 (average claim) to invest in future innovative developments.
One very important final note is that your project does not need to have a successful outcome. It is the aim and the process that entitles you to R and D Tax Credit, not the result of your project. Even if it fails entirely, as long as you can explain and show the intention, you can claim for R and D.
How do I start a claim?
Sometimes it just requires a small shift in perspective to realise that your company is ‘doing’ R and D activities. It may not be happening in a specific ‘R and D’ department, but is actually embedded in your everyday work. Often, getting an outside, expert eye on your business can quickly help you identify and maximise your R and D claim. You don’t need to ditch your existing accountant, we only deal with R and D claims. Get in touch today and discover how much you could get to plough back into your amazing innovations.