And the truth behind all the Yuletide hubbub is nowhere near as quaint. But for us R&D folks it is fascinating to see just what goes on behind the scenes to make Christmas work.
Well, there are 12 days of Christmas so in true ForrestBrown spirit we have prepared 12 snapshots themed around R&D and the festive period.
1. 12 days of Christmas? Really??
Not according to data analyst Nathan Cunningham who won a runners-up prize in this year’s Young Statisticians Writing Competition organised by the Royal Statistical Society. His study of internet search terms such as ‘elf’ and ‘presents’ led him to conclude that in 2014 the festive season actually began on, wait for it… Aug 25. So should that be 135 days of Christmas?
What’s all this got to do with R&D? It may not be at the forefront of most people’s minds, but big data is big business. R&D into collecting, sorting, analysing and utilising data, powers so much in the digital world we would be lost without it.
Big data is an expensive business, a number of the claims we’ve handled for companies focusing on big data development projects have been worth several hundreds of thousand pounds annually, for work developing platforms capable of filtering through billions of pieces of data.
2. Unwrapping a comparison site
Hopefully you’ve got your Christmas shopping done in time. And like many people you may have turned to the internet for some or all of the task. As we have alluded to in the first snapshot, a lot of R&D goes into powering the internet: big data, algorithms, coding.
What about comparison sites? Websites that feed in data from online retailers to let people weigh up two or more products. Many have been a life saver in the Christmas rush! Most comparison sites work on simple filters such as price, screen-size etc. but how about if you need more?
Many companies are developing complex algorithms that replicate what you might ask a store assistant when buying a particular product: “Best for the kitchen”, “Kid-proof”, “Best for showing films or sport”. When designing something like this there is technical uncertainty as to whether it is possible to successfully replicate these human interactions, so such work is ripe for an R&D claim.
3. Christmas present one – What one client spent his tax credit on
R&D tax credits can be paid as a lump sum into your company bank account or deducted from any money due to HMRC, or taken as a reduction in your Corporation tax liability. Either way they are immensely valuable to the business. In fact the average claim value for our clients is over £46,000 with many receiving significantly more.
R&D tax credits can come at any time of year but when they arrive it kind of feels like Christmas for the recipient. We asked some of them what they spent the money on, and their answers are dotted throughout this blog.
To get us started, one digital agency told us that they had re-invested the money they received from the tax credit in future research and development – by hiring a Director of Innovation, a decision made much easier because a decent portion of their salary can be recovered from HMRC. A perfect example of the virtuous funding circle that R&D tax credits help perpetuate.
4. Check out the R&D that goes into e-commerce systems
Still on websites, and just to show the scope of all the components that potentially go into making one, we shine the spotlight on the e-commerce function. That’s the shopping trolley icon when you come to buy something.
e-commerce requires a great deal of resource to get right. And therefore typically, there is a lot of R&D is involved.
Above all, e-commerce sites need to be secure. They are prime targets for hackers keen to get their hands on industrial quantities of credit card details. The research and development into tokenisation – where sensitive information is converted into a non-sensitive equivalent – and rules engines – which recognise user behaviour and decide how to respond – come into play here.
Then there is customer journey and design. Abandonment is a big issue in e-commerce when people encounter a difficulty and give up on the transaction. Therefore research into graphics in the front end of these systems to make them as simple and smooth as possible is a key area and the uncertainty in the outcome is an important factor in an R&D claim.
Finally scalability and robustness are vital. Can a system cope with demand on a business critical day like Black Friday or Cyber Monday? Can scale as the business grows? These are questions that extensive research and development helps to answer.
5. Putting the sparkle in Christmas advertising
Love them or hate them Christmas adverts are an established part of the festive season. From classics like the Coca Cola’s Santa Claus series, to the modern day rivalry between big retailers like John Lewis’s Monty the Penguin and Sainsbury’s controversial World War One piece.
Brands invest heavily in producing such commercials and R&D goes on in their production. For example it was reported that John Lewis budgeted £1 million for this year’s Christmas production. We have helped digital agencies claim for work done on CGI, custom camera equipment, coding and 3D modeling to cite just four areas of R&D that may go into making a ground breaking advert in 2014.
6. Christmas present two – More examples of how R&D tax credits were spent
Time to unwrap another R&D Christmas present, and this time the clients spent the money on expansion. Two companies came back to us with property acquisitions. One used the additional funds to make a much needed move into bigger offices. Meanwhile another had an exciting branch-out across the pond with the opening of a new office in New York.
7. The real Santa’s sleigh: R&D in logistics and delivery
So you buy your presents online, and then of course they have to get delivered. But who really plays the role of Santa and his sleigh? Courier and postal companies of course.
This is a tremendously innovative sector where fine margins can define whether a company makes big profits or big losses. The 2014 Christmas rush has not been universally successful for the couriers, with one company in particular getting it wrong and becoming swamped in their own parcels. They even suspended all collections for a few days at this busy time.
But the vast majority of letters and parcels do get delivered on time. And delivery options are becoming increasingly sophisticated. This requires extensive R&D into physical processes, back office computer systems and client facing technology. Delivery windows have been hewn from a day, to half a day, to one hour, with even shorter windows promised in the future! Some companies go as far as to let you track your parcel live using an online map and GPS tracker.
And there has been much talk of Amazon using drones to deliver parcels. CEO Jeff Bezos seems determined to make this a reality which could see Amazon orders in the UK delivered within half an hour of being made.
As you may imagine, the R&D path to achieving this is fraught with uncertainty. Amazon is currently wrestling with the American Federal Aviation Administration to be granted a license to carry out extensive tests in the open air. As news-stories this side of the Atlantic show – concerning near misses between drones and commercial airliners – there is justified worry over how drones will operate in the civilian world, and requirements for entirely new infrastructure.
8. Having fun with R&D in toys
The toy sector is highly innovative. Across Europe (the largest toy market in the world) 60% of products on the market each year are newly developed products. This compares to 40% in other industry sectors. Qualifying areas could include materials, engineering and safety testing. And increasingly, digital R&D is relevant to toys.
This interesting blog from the BBC explains how they experimented with universal controls in embedded devices to explore the impact of “ubiquitous computing” and the “Internet of Things” on Dual Screen Experience.
What did they come up with? A modified, off-the-shelf toy Dalek that sensed when Doctor Who was showing on the television and responded with appropriate dialogue and actions. It’s a shame that this particular toy is not in commercial production, as we know plenty of little (and big!!) kids that would get very excited by it.
9. Perfecting Christmas food through R&D
Food generally is a massive area for R&D. From the fields where it is grown and reared to the waste disposal where we get rid of left-overs. And everything in between.
An area of particular interest at this time of year is in recipe formulation and testing – this could include experimentation for taste, preservation, appearance, consistency and proportion. Costs of materials, utilities, premises and staff could all be relevant to an R&D Tax Credit claim.
With fierce competition among brands and retailers it is commercially vital that producers come up with the most magnificent mince pies, perfect pigs in blankets and cracking Christmas puddings to avoid having the January blues.
10. Christmas present three – Using R&D tax credits to boost the balance sheet
A final round of Christmas presents. Some people use the R&D tax credit simply to manage their company finances. One of our clients told us they were relieved to get the tax credit through to pay off the company’s debt.
Another client used the money to avoid embarking upon a round of fundraising. What an innovative way to retain equity in the business! We have even have one client who simply felt it was too good to be true, and has left all the money sitting safely in the company bank account!
11. Tech presents – The ForrestBrown office’s wish list this year
Adam Kotas – Senior Tax Manager
“Bristol has never been car friendly and has become a nightmare to park in over the last year. So top of my Christmas list is the eko Speedster electric scooter. I can beat the traffic, park it easily and it’s environmentally friendly. Perfect for Bristol which is the 2015 European Capital of Green. OK if money was not an object I would prefer a Tesla electric sports car but then I would run back into my traffic and parking problems!”
Kerry Young – Office Manager (and Android)
“I’m not a massive techie but I’m looking forward to getting a Samsung S5 as I simply can’t get along with my iPhone. Give me an Android!”
Simon Brown – Managing Director
“I am excited about the Apple Watch. I like the idea of having so many functions at the tip of my fingers. And of course being Apple it looks great too!”
Alex Price – Director
“I’m hoping for an Apogee Jam under the tree this year. It’s an interface that lets you plug your guitar directly into GarageBand on a Mac. And voila you have a recording studio in your own home. I’m not convinced my wife is on board with the idea though.”
12. ForrestBrown since Cunningham’s 135 days of Christmas began
We have had a whirlwind year. And to come full circle on our 12 days of Christmas here is quick review of all that’s happened at 39 Alma Vale since Cunningham’s 135 days of Christmas began way back in sunny August.
Back then the Scottish Referendum was yet to take place, Liverpool fans were full of optimism at the prospect of a season in the Champions League, and here at ForrestBrown we were just approaching our first birthday!
We celebrated with a wine tasting in one of Bristol’s historic pubs before researching the nightlife of the city centre. We are afraid to report that one or two of us did develop hangovers the following day!
We have been busy recruiting. Since 25 August, five new faces have joined the team, comprising of one Director, three Tax Advisers and a Marketing Manager. In addition to this Lisa-Marie – our first member of staff – was promoted to Director to recognise her outstanding work.
As you might expect with all the recruitment we have been exceptionally busy helping innovative companies with their R&D Tax Credit claims in this period. In fact we have made R&D claims worth well over £5 million. There is so much innovation out there and we find it extremely rewarding to be part of this community driving the UK economy forwards.
And so to December and our Christmas Party. As reward for all the hard work and success that we have had this year, the company took all staff to Copenhagen where we exchanged R&D for R&R. We had a riot on Segways, the obligatory tour of the home of Carlsberg, a fantastic meal at Viva; and after a late night, a gentle stroll around the Christmas markets.
That’s a wrap on our 12 days of Christmas. Merry Christmas everyone and an innovative New Year!