Should a Bespoke Engineering Business be claiming RandD Tax Credits
Date: 5th February 2013
We are often asked should a Bespoke Engineering Business be claiming RandD Tax Credits?
If you’re not already claiming R&D Tax credits, then check this article out.
If you are claiming, or rather your Accountant has claimed a nominal amount on the year end accounts, then look below – you could be seriously under-claiming and leaving substantial cash on the table…
Many Bespoke Engineers are claiming R&D Tax Credits – shouldn’t you?
So, what do we mean by a “Bespoke Engineering Business”?
Well, you could be manufacturing conveyor systems, or integrating electro-mechanical components into systems, or making material handling equipment, or creating electrical control panels…the list goes on.
What are the rules to see whether you could qualify?
Have you designed a piece of equipment to do something and was there any technical uncertainty in how best to do this? Did you have to trial the kit or do some testing to make sure it worked? Maybe a bottle capping device, or a faster and quieter handling solution for your customers, or a smaller more compact solution, or an energy efficient better answer than you manufactured before….
Are you focused on creating more competitive solutions to win business and do you use science or technology to drive these improvements? Perhaps you have created or subcontracted better software to control the system, or you have integrated superior drives, or you have developed new more compact designs using the latest generation of electrical/electronic components, or maybe you’ve started to use a piece of hardware made from new material…
The bottom line is that if you have developed a new bespoke solution using all your in house skills to make it better, easier to make, more efficient, less expensive….whatever it takes to be more competitive and up to date, then you should talk to an RandD Tax specialist now….( and don’t wait till your year end because you will lose a full year’s past claim).
Can my Accountant claim for me?
Yes, your Accountant should submit the claim for you, but their skills are focused on matters financial and tax, not on your technology. If, as is the norm, they don’t understand your technology, then you could be under-claiming, often substantially. Why not ask them?
By the way, its always best to use your own year end Accountant to submit the claim. Some R&D tax specialists like to impose their partner tax accountants on you and that’s not necessary…..just an extra cost. It’s better to use the people you already trust.
To maximise your claim, for this year and for your previous two financial years, you need to identify what will be classed as qualifying R&D and what costs should be included. HMRC like to have a Technical Justification to support your claim and that’s the bit that many Accountants don’t provide. (Some of the bigger firms have technology specialists, but most don’t.)
At RandDTax, we frequently see unsubstantiated claims being submitted, often very, very significantly below the SME average of £43K (see HMRC statistics on http://www.hmrc.gov.uk/statistics/research-tc.htm).
What should I do to scope out my potential claim?
That’s easy. Just call an RandD Tax specialist and have a 10 minute telephone conversation. They will look at your website to see what you do and discuss which of your costs qualify. The better R&D tax specialists will never charge for this initial review. Only when you have a strong case, and are properly informed, do you need to make a claim/don’t claim decision.
An RandD Tax specialist will help you to write the technical justification, will advise you on what does and doesn’t qualify, will clarify what costs should be included and will support you should there be any questions on your claim.
What will it cost me to claim?
You should look for a competitive rate as a percentage of the successful claim. Some Tax specialists are charging between 20% and 33% and that is outrageous! (Make sure that you ask them how much they will charge you first.)
so…should I be claiming?
If your business is technically creative and you’re spending money keeping your products or services competitive, then you should be claiming. Nobody wins if you don’t claim you full entitlement.
Don’t leave your money on the table. The Government wants to support SME’s who are investing in R&D and it’s not just about rocket science or men in white coats. Bespoke engineering business should be claiming too!