"Instead of being executors of communication campaigns, we must become inventors, architects and conductors" - John Winsor, CEO of Victors And Spoils

We love working with digital agencies at ForrestBrown. We’ve helped a number of them to claim millions of pounds worth of R&D tax relief, and they’re always creative, interesting, ambitious and driven. As a tax consultancy, we’ve learnt a lot from the way that digital agencies operate, and we feel this is something that sets us apart from others in our sector.

The problem with so many agencies being creative, interesting, ambitious and driven is that competition is fierce, and constant. No agency can rest on their laurels, and that’s especially true for digital agencies.

This is partly compounded by their position in the marketplace, caught between technical, creative and business skillsets. However, as we shall see later, this position also contributes to some of their key opportunities.

Beset On All Sides

The contemporary digital agency faces competition from – or, more optimistically, competes in – all directions.

User experience, standards compliance and technical site improvements are fought over with developers. Innovative campaigns and content marketing face pressure from copywriters, publishers, and production companies. Talented business development staff, in roles ranging from management to directorial to executive, are taking on increasing amounts of high level marketing strategy, campaign architecture, and brand management – for most agencies, cold-calling went out of the window long ago in favour of carefully crafted content marketing campaigns tailored towards their target audience, designed to spark conversations and ultimately get the phone ringing. Data analysis and presentation, traditionally a core strength of marketing agencies, has been encroached upon by data scientists and specialist data-handling startups.

We’ve even talked about the possibility of accountants taking over decision-making roles before.

As scope, ambition and expectation expands, so too do the inevitable threats and rivalries. For an agency to survive in the long-term, they have to invest in research and development to keep themselves ahead of the curve, whether they realise that’s what they’re doing or not.

Intersecting Domains Mean Research Opportunities

These intersecting domains lead to real opportunities to carry out novel R&D, as established truth in one domain may or may not be applicable to another, and new techniques are required to circumvent new challenges.

Digital agencies can make especially large strides if they commit to big research projects where their remit overlaps with web technology, data analysis, or software development. This is where John Winsor’s exhortation to become “inventors” rings especially true, as there’s still so much potential for new ideas and new software from digital agencies.

In fact, many digital agencies are already embarking on such research and development projects – they just don’t realise that they qualify as R&D from HMRC’s point of view. Good examples of digital agencies already carrying out visible work to resolve technological uncertainty include SEOMoz, e3 and R/GA London, although only the latter two are based in the UK.

Anything But Market Research

Bear in mind that we’re coming at this issue from the point of view of an R&D tax consultancy. While market research might represent a significant investment on your part, and deliver impressive results for your clients, it’s not (typically) what we mean when we say “research”.

To quote from the government’s own guidelines, Work in the arts, humanities and social sciences, including economics, is not science for the purpose of these guidelines. Market research is also typically excluded.

The cost of tools you create to gather data, novel techniques to analyse the gathered data, or the prototypes of a suggested design alteration may all still qualify as R&D expenditure, however. There is a lot of room for research within marketing even after discounting ‘market research’ itself.

Secondary Benefits

As we’ve hinted, there are secondary benefits to investing in research and development. Those secondary benefits come in the form of R&D tax relief, courtesy of HMRC, whether those benefits take the form of a R&D Tax Credits or Research and Development Expenditure Credits.

If you’re already investing heavily in research and development – you may even have people or entire teams dedicated to R&D – then acting to secure the maximum amount of R&D tax credits you are entitled to is a fairly obvious step. If you’re not already investing heavily in research and development, well, now is a great time to start, with attractive incentives from the government combined with a competitive but highly profitable market.

Want To Know More About R&D Tax Relief?

If you’d like to know more about R&D tax relief, we do have many more R&D tax resources right here.

If you still can’t find the answers to all your questions, we’d be happy to discuss them with you. Pick up the phone or drop us a line, and we’ll have a chat to see if you could be eligible for R&D tax credits.

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