R&D Tax Credit Claim for SEO

In this case study, we provide an example of a successful R&D Tax Credit Claim made for a Manchester based SEO (Search Engine Optimisation) company that was supported by RD Relief's R&D Tax Advisors.

This article assumes that the reader has a 'fair' understanding of the R&D eligibility criteria (at least the concepts of Technological Advance and Uncertainty). If not, then these should be reviewed before reading this article.

The agency was mid-sized (employing approximately 40 individuals) and owing to its ownership structure it qualified as an SME (Small and Medium Sized Enterprise) for R&D Tax purposes. With the company meeting the size (and turnover/assets) requirements it meant that the company was eligible to claim under the most beneficial SME regime (relative to the large company RDEC regime and the RDA regime).

The agency was undertaking several software development projects to create new (and improve existing) tools to support their clients in various ways. You can find more information about this type of development in the Digital Marketing industry insight and Software Development industry insight RDReliefPages. These projects were financed directly by the digital agency themselves (rather than being directly undertaken for a client, or being grant funded) - which meant that they qualified for the SME relief (since the company was also an SME, as above).

Also, the digital marketing agency was also undertaking more direct SEO projects that were considered more difficult to map to the R&D guidelines - as explored below.

There were two streams of work undertaken that were in the company's SEO stream of projects:

1. Changes to software tools to be optimised for search engines
2. Direct development of client company websites - for SEO purposes

The first stream of work was the easier of the two to map to the R&D guidelines, involving the development of new low-latency algorithms into the core frameworks to be able to performantly scan thousands of pages of a customer's website and produced detailed analytics of the platform.

Achieving this required the digital marketing agency to go beyond the knowledge available in the public domain and so the project was assessed to represent a technological advance. Since there was uncertainty as to how to achieve low-latency real-time execution of the sophisticated analytics (while a customer is waiting for a live report) this project was assessed to qualify as R&D for tax purposes. More specifically, there was uncertainty as to how the new algorithms could be designed to be scalable (so that multiple clients could be executing similar analytics concurrently without performance degradation). Primarily this scalability manifested itself owing to the intricate linking of data structures underpinning the technology, resulting in Technological Uncertainty - and so the Project was classified as R&D for Tax Purposes.

The SEO undertaken directly for clients was more difficult to map to the R&D eligibility criteria. The difficulty with the client-based SEO was because the activities consisted of both applying standard industry practices (in known ways) and more Technologically Uncertainty changes - such as fundamental changes to JavaScript based frameworks to underpin the client's website. Modifications to these frameworks would affect the performance of the RDReliefPages. Because of the bespoke nature of these underlying frameworks, there were no standard ways to improve the performance and so Research and Development of techniques to appreciably improve the underlying code.

Sometimes SEO projects do not qualify for R&D Tax Credits. For example, where Projects are applying standard techniques to solve a business problem (improving a website ranking is classified as a business rather than a technological problem, even though it requires the application of technology to achieve). Hence, activities to update meta, title and heading tags would not qualify. The project illustrated in this case study went much further than that type of SEO activity - as it was responsible for appreciably improving underlying technology to achieve the functional requirements. It is this that made the project an R&D, rather than BAU, project.

The costs to design, develop, test and project manage the internal software systems qualified (claimed in the SME regime). The costs to appreciably improve client websites for performance were paid for directly by the client - thus pushing them into the large company (RDEC) regime.

The SEO applied directly to client websites - to changing content and restructuring HTML was entirely excluded from the claim.