mca group

Engineering companies – qualifying R&D activities

We have been covering industrial sectors and applicable R&D tax credits, those that are not always obvious.  The UK has thousands of engineering companies doing a variety of activities, and many of these are eligible.

Steel bashing, mould, presses, assembly lines, etc. Surely that’s not R&D? But it might be…

Take this company as an example.

It specialises in the design and build of specialist tagging devices for a wide range of specialist applications. The company identified niche market opportunities where there was a clear need and designed solutions to sell into that market. In some cases, they were bidding on a fixed price basis to meet specific customer requirements. But whether they were “blue sky thinking” or seeking to solve a specific customer problem, they took the development risk in all cases.

In each case the criteria as set out by HMRC were met. The developments represented advances in the capability of technology to deliver a solution to either the general market need or the specific customer need. No other solutions were available in the market.

Developments included solutions using traditional bar codes, more up to date RFID solutions, and even GPS monitoring solutions. The uses ranged from very small portable items, to very large items of freight being shipped overseas in containers by air or sea. And as well as developing the actual devices, the company also wrote software that produced location reports as to where each tagged item was at any point in time.

We were appointed to help prepare R&D claims going back two years, and to put in place a framework for capturing information going forward. We also wrote a detailed report, setting out the background to the industry and the company, and how it had gone about developing its unique solutions.

The company received over £200,000 back from HMRC, which it had no idea it was due until it met us. This unexpected and welcome bonus enabled the company to invest more heavily in R&D in the coming months, enabling it to get one of its new products to market nearly six months earlier than it had been expecting. It is now generating significant, profitable revenue in a period when it expected, at best, to just be breaking even.