Are R&D tax credits available for the e-commerce sector?

The convenience that e-commerce delivers has made it a core component of the retail offering for both shoppers and merchants. Global e-commerce sales have steadily risen, expected to hit $5.4 trillion in 2022. And the market opportunity will only grow as retailers embark on R&D to create new innovations that improve their operational efficiency and enhance customer experience.

The good news is that if your business uses e-commerce, some of those costs could be eligible for R&D tax credits. This could provide your business with a cash injection to support your growth.

What are R&D tax credits for e-commerce?

R&D tax credits are a UK government tax relief that rewards companies of all sizes and sectors who invest in innovation. The relief received is between £0.11-£0.33 for every £1 invested. And even if your business is making a loss, it’s still possible to make a claim.

Read more about R&D tax credits.

But despite the number of claims increasing, ‘wholesale and retail trade’ are significantly behind other industries that rely equally on technology innovation. The latest data shows that the sector made fewer claims than ‘information and communication’, ‘manufacturing’, and ‘professional, scientific and technical’.

An e-commerce business relies on technology for:

• Fundamentals: ensuring basic functions, like a website that works quickly, securely, and reliably no matter the usage.
• Optimisations: using technologies to continuously improve processes and gain efficiency/cost savings – like A/B split testing to improve conversion rates in the customer journey.
• Advances: employing new functionality – like virtual reality, customer recognition, and content personalisation – to augment the experience, which delights and excites customers.

Yet, just because you use technology does not make you eligible for R&D tax credits. The guidance on R&D tax claims is clear that the outcome must ADVANCE technical or scientific innovation. So, while basic website updates are unlikely to qualify, using next-generation technologies to improve the customer experience might.

Here are some examples of e-commerce innovation that may qualify for R&D tax claims:

• The development of a bespoke e-commerce platform
• Improving integrations for stock and account management
• Using data analysis to make the supply chain more cost-efficient
• Designing new secure worldwide payment gateways
• Enabling a modern checkout experience to reduce cart abandonment rates

What is the benefit of making an R&D tax claim for e-commerce?

R&D tax claims are a great way of establishing cash flow within your business, particularly if your organisation is currently making a losshe biggest benefit is that they create a cycle of innovation to help your business thrive.

By reinvesting your R&D tax credits, you have the funding to hire new skills, purchase new equipment/technologies, and embark on different projects. Be smart about how you use your R&D tax credits. It can help your business achieve more, maintain a competitive edge, and hit strategic objectives more quickly.

How you can use R&D tax credits in e-commerce innovation

The following is not an exhaustive list but shares some of the e-commerce innovations that our clients have managed to successfully secure R&D tax claims for:

• Enhancing the website experience: using voice search, chatbots and VR technologies to create an immersive shopping experience that replicates what it feels like to shop in-store.
• Streamline third-party integrations: connecting the dots between the customer-facing website and back-office systems to improve stock control, delivery and returns.
• Mobile optimisation: last year, smartphones accounted for 70% of all retail website visits worldwide. Using next-gen technologies you can enhance the site speed and UX to improve conversion rates.
• Boost the customer experience: taking advantage of big data to gather intelligent insights that drive marketing initiatives, like personalised offers and customised products.
• Extend payment technologies: when 70% of shopping carts are abandoned, adding e-wallets (like Apple Pay) and digital currencies (like Bitcoin) encourage customers to complete the checkout process.
• Tackle online threats: online payment fraud costs the retail industry $20 billion per year. But with customer authentication technologies you can verify who is transacting with your business – and it supports your PSD2 compliance.
• Need help claiming R&D tax credits for e-commerce?

As R&D tax specialists, we have a wealth of knowledge and experience supporting e-commerce companies in accessing the full potential of this generous government incentive! It’s why our average SME claim is 28% bigger than the industry standard – with clients receiving an average of £73k cash boost to their business per R&D tax claim.

Whether it’s your first time claiming R&D tax credits for your e-commerce business, or you want reassurance you’re getting the most out of your claim; we’re here to help. Our award-winning services give you maximum, tailored support from our team of R&D specialists to suit your needs. Our client service is unmatched across the industry, proudly recommended by over 95% of the clients we work with.

Learn more about claiming R&D tax credits in the retail sector.

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