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Phenomenal results: How MMT Digital transformed its workplace through R&D

Challenge

After listening to other advisers, a digital agency incorrectly thought it didn’t qualify for research and development (R&D) tax credits, and was missing out on valuable government incentives.

Impact

MMT Digital was doing cutting-edge R&D, but not claiming R&D tax credits. But after a conversation with us, MMT kickstarted its claims process with ‘phenomenal’ results.

Value

By working with us, MMT not only unlocked a valuable source of revenue, it also created a new culture of R&D that has seeped into every part of the business. This healthy culture helped MMT retain staff and attract the best and brightest digital talent.

"Don’t get hung up on terminology – ‘R&D’ covers a lot of different activities. The pay-off of doing so can be phenomenal!" James Cannings Co-founder, MMT Digital
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The digital agency MMT Digital came of age about the same time as the research and development (R&D) tax credit incentive was launched in 2000. It was seemingly a match made in heaven.

MMT Digital is one of the top 20 design-and-build agencies in the UK. A key to MMT’s success is R&D: they stay ahead of the pack by undertaking R&D themselves outside of client projects.

And yet, despite its cutting-edge work, the agency wasn’t making use of R&D tax credits. Not through a lack of interest, however. MMT Digital had heard about this powerful government incentive, but had only got as far as informal conversations with other advisers, who wrongly suggested they didn’t do R&D.

Didn’t qualify for R&D tax credits

The company took these assessments at face value and, like so many other companies, MMT simply didn’t realise it qualified for R&D tax credits.

Of course, innovation is a worthy endeavour in-and-of-itself and MMT kept doing challenging work with tremendous benefit to itself and its clients – but, at the same time, the agency was not harnessing the full benefits of its investment.

By not claiming R&D tax credits, MMT was missing out on a substantial source of revenue, especially given the amount of R&D they were doing. But things changed after MMT had a conversation with ForrestBrown. After only a brief chat, the agency’s understanding of what is and isn’t R&D was radically transformed.

Looking back, claiming R&D tax credits was a “no-brainer,” says James Cannings, the co-founder of MMT Digital. “If you work in a digital or tech space, I would encourage you to have a conversation with ForrestBrown to see if you can benefit.

The diverse world of software R&D

Software R&D, in particular, is a varied field. It can be found in the development of a new product, service or process, or even in the improvement of existing ones.

A good rule of thumb for identifying R&D activity is if your work involves a degree of difficulty. If a complex problem has been solved by experimentation or iterative development, then it could well be R&D.

In MMT’s case, the agency wanted to achieve advances in gesture recognition and HTML5 canvas development. The company was unsure whether these improvements could be achieved. The project, however, was a great success and the platform MMT created is now available commercially and is used by many publishing houses.

The best result

The work MMT undertook is the optimal result for R&D tax credit claims: the project was commercially successful and its development costs were offset by generous tax credits. It was a win-win for MMT. But it’s important to remember, you can claim for unsuccessful projects, too.

That’s what makes R&D tax credits so powerful: they can boost your windfall when your R&D is successful, and they can cut your losses when you take a risk that doesn’t pan out. And the incentive has helped MMT Digital maintain and build on its R&D.

The R&D tax incentive allows us to maintain our cutting-edge position, keep relevant and deliver the best solutions to clients. James Cannings Co-founder, MMT Digital

R&D tax credits have a powerful halo effect: as businesses are incentivised to innovate, a new culture of R&D emerges naturally. For employees, it fosters an exciting, stimulating environment rather than a humdrum 9-to-5.

At MMT, a culture of R&D gives the agency a tremendous boost in its efforts to recruit and retain talent, Cannings explains. “Developers enjoy the R&D part of their job, so the more we can offer them, the happier they are, and the more they want to join or stay with us. It contributes to a great workplace culture.”

ForrestBrown thinks

MMT Digital’s story is by no means unique. All too frequently, businesses from all different sectors overlook R&D tax credits as something not for them. In some cases, as with MMT, they might even have been told explicitly that they don’t qualify.

But in our experience, if your business is involved in software development, there’s a good chance you could benefit from the government’s R&D tax incentives. In fact, ICT businesses claim 28% of all R&D tax credit claims made by SMEs.

It’s not only ‘pure’ ICT businesses who qualify, either. As the American investor Marc Andreessen famously put it, “Software is eating the world”. By that Andreessen meant there are fewer and fewer parts of our economies and societies untouched by software.

The parameters of ‘software’ are constantly shifting and increasing. HMRC recognises this and published new guidance last year replacing outdated and generic examples. Our own senior sector specialist, Tom Heslin, was on the HMRC sub-committee that created the guidance.

There are many types of business who could potentially claim software R&D tax credits, if they have ‘developed software to overcome a challenge’. The scope is wide and we’ve helped all sorts of businesses claim effectively, including retailers, banks, software companies and product design firms.

If you’re a digital agency firm and want to find out more about working with ForrestBrown and the value we bring, contact us today.