Precision Engineering and R&D Tax Credits
Date: 22nd April 2016
RandDTax have successfully prepared claims for Precision Engineers with cash credits or corporation tax relief of up to £200K being received from HMRC for Research and Development qualifying projects and associated costs.
This is a specialist area and requires a combination of understanding the technology and identifying the qualifying costs.
Identifying what projects comply, and the qualifying costs acceptable to HMRC, is exactly what RandDTax do. We apply robust quality assurance procedures to all Claims prepared by us, seeking full compliance and maximizing the value of your claim. Our staff include Scientists, Technologists, Engineers, Accountants and Financial specialists. Our track record with HMRC, which we jealously guard, remains at a 100% success rate. RandDTax will simply not advise you to Claim unless we are satisfied that it should qualify.
We advise and help in the creation of the HMRC required narrative justifying the claim and in the build-up of a claimable costs analysis. Together with you and your own Tax Accountant, we work as a team to successfully deliver a claim that is submitted to the HMRC R&D unit.
The Claim rules.
Precision Engineering often involves the design and creation of prototypes for customers who wish to see a satisfactory solution designed, documented and machined before any volume order is placed on the supplier.
As such, the risk of creating, designing and manufacturing the prototype lies firmly with your Precision Engineering business.
HMRC have five key criteria to satisfy for a claim to be accepted:
1. The financial risk of doing the development and prototyping must lie with you, the Precision Engineer. You don’t receive payment unless you succeed.
2. The projects must be either science or technology based – mechanical engineering and precision machining complies with this.
3. Your business must employ technically competent staff.
4. There must be technological uncertainties, often centered on your ability to create a correctly produced prototype. Examples of these are tooling issues, exotic material problems, achievement of the necessary tolerances, machining complexities, testing performance requirements and/or specialist coatings being applied. Identifying a technological uncertainty is key to the claim.
5. There has to be an overall advance in knowledge or capability in a field or Science or Technology sought (Failed projects do qualify). These can be the use of new materials, or longer life than previously possible, or a new process to achieve better performance, or a new design delivering some technological enhancements over what was previously available. Identifying the advance is also key to making a successful claim.
What can be claimed?
For many Precision Engineers, this is exactly what you do. You take on a tricky machining or prototype development job and accept an order based on the successful delivery of the pre-production prototype which may be a completely new component or sub-assembly, or a modern improved version of a reverse engineered obsolescent part.
Qualifying Costs can include:
• PAYE wages of staff involved in and contributing to the development projects.
• Project management.
• Prototype work contributing to the development of a solution.
• Specialist programming of machines.
• CADCAM activity.
• Some of the external Non-Destructive Testing work.
• Materials consumed in the prototypes.
• Scrap costs.
• Partial subcontractor costs, paid for by you, which have been incurred at your risk.
• Prototype tooling and jigs which are not used for the production runs but necessary to prove the design and overcome the technological uncertainties.
• Some Utility Costs.
How long does it take to benefit?
Once a claim is prepared, and our job is to make this as painless as possible, then we work closely with your Corporation Tax Accountant who submits the Documents to HMRC. It usually takes around 5 weeks for the claim to clear and the Tax Credit or Corporation Tax relief due to be settled.
Jaime Lumsden, Director.