Invest to Grow: Changing perceptions of R&D tax credits

Cocoonfxmedia Ltd

This case study is part of the Greater Birmingham Chambers of Commerce’s Invest to Grow campaign. Invest to Grow aims to inspire and inform businesses around investment in R&D, innovation, technology and machinery and how it can help boost productivity through case studies, expert opinion pieces and briefing information. Click here to find out more and don’t forget to join the conversation on social media with #I2G18. Part 1 of Invest to Grow focuses on investment in innovation and research & development and is sponsored by the University of Birmingham.

I founded Cocoonfxmedia Ltd, an award-winning SME marketing agency specialising in digital marketing, in 2010.

Until 2016 we had not thought of ourselves as undertaking research and development (R&D). I did not know anything about R&D Tax Credits, how to make a claim or even if we qualified. We thought our company was too small for it to apply.

In 2016 we delivered a project which involved improving software used by a customer’s e-commerce machines. These “kiosks” were based in shopping malls and allowed customers to select, customise, order and pay, print a receipt then collect from the store items such as t-shirts and mugs.

In effect, the “kiosks” convert a customers’ design into a PDF and send it directly to the relevant printer for finishing the product. Our work began by coding the algorithm that enabled the system to translate the onscreen design into a print-ready PDF.  

We then looked at how the “kiosks” transmit the design and maintain an up to date database of available stock. In some of our client’s locations there was no broadband connection available. We worked with the client to explore, test and implement alternative options. We explored 3G and 4G networks and tested speeds on each of the major networks before selecting the fastest.

To us, this was very much “the day job”, ensuring that the service we were offering fit our customer’s requirements. However, after meeting an R&D tax expert we discovered that this project in fact involved a significant amount of compliant R&D and could be entitled to a significant cash rebate.

The R&D tax expert we worked with identified that significant amount of staff time invested in this project qualified as R&D. Even for a small team we were able to claim a considerable amount of credits back and the process was relatively easy for us to do.  We just had to provide our staffing costs, the time spent on the research and development and then the equipment/materials which lead to the project being delivered. 

Our expert then went off and wrote up the project and did the calculations. All in all, it took about 2 days of our time to explain what we did. The expert wrote up the claim with supporting evidence. We then submitted the claim to HMRC and then within 14 days we received a cheque for a 4-figure sum. 

This helped improve our cash flow and also allowed us to purchase some capital equipment to allow us to work more efficiently.  To make future claims easier we now keep detailed logs of all potential R&D and all costs associated. We have now been doing R&D Tax claims for over 2 years and each claim has helped us improve our productivity and services.

I would encourage other businesses to consider exploring whether, what you might think are day to day improvements in your products or services, qualify as R&D. The process of doing a claim was pretty easy if you use an expert, which I would recommend, particularly for small businesses: the claim does need to be very precise. Any mistakes could result in HMRC declining the claim or even, in the worst case scenario, claiming back up to 7 years’ worth of R&D tax credits if they think they’ve been improperly claimed.

If you think your businesses is potentially undertaking R&D you should definitely do it, there is a fear of putting your head above the parapet with HMRC however if it means you can get money back to help grow your business, why wouldn’t you?

About Cocoonfxmedia Ltd:

Cocoonfxmedia Ltd are an award-winning marketing agency specialising in digital marketing which includes web design, web development, digital marketing and web hosting. We provide our clients with measurable marketing solutions using innovation and user based design.

James Blackman
Managing partner
Cocoonfxmedia Ltd