Does your company receive its full entitlement to research and development corporation tax credits?

This month PECM talks to Fiducia Consulting who have supported a large number of clients in the engineering sector in their efforts to maximise their entitlement to research and development corporation tax credits.

We asked their consulting partner, Henry Poultney, why there is a need for consultancies such as Fiducia to help companies obtain what is rightfully theirs. “When you consider that this tax incentive was introduced in 2001 and yet, sixteen years later, only 2% of manufacturing companies are claiming it, it is blatantly apparent that there is a massive lack of awareness that needs to be overcome amongst companies that should be claiming it” says Henry.

Henry continued, “When we first engage with them, the vast majority of our new clients either have very little knowledge of the scheme or, if they do, they often believe that they are not conducting the type of R&D activity that would qualify them for R&D tax credits.”

Surely their accountants should be advising them of their ability to claim?

“Whilst every accountancy practice  is  aware of the scheme, they are also aware that any claim for  R&D tax credits  must be  supported by an exhaustive  technical  overview  of  the qualifying R&D activity if  the claim is to  be successful. With the best will in  the  world,  accountants  tend not  to be  technically minded  and  this  aspect  of  formulating  a  claim  falls outside of  their core  financial  skillsets –  which  is  why we work in  partnership with a  number  of accountancy practices so that Fiducia can fill this technical void for their clients. In  fact, more  than 90% of  our new  clients come referrals from financial advisers or existing clients who have benefitted from our services”.

So how exactly does HMRC define Research & Development? “As you would expect with any tax legislation, there are many nuances and occasional grey areas. In simplistic terms, if your business is investing time, energy and resources in order to make an appreciable improvement to an existing process, material, device, product or service through scientific or technological changes – then such activity will be R&D”.

What is the typical value of an R&D tax credit within the engineering sector? “It is difficult to generalise” says Henry, “as this is usually influenced by the size of the company and the degree of development work it is undertaking. However, HMRC’s own published statistics for 2014/15 showed that, across all sectors, the average R&D tax credit paid to SME’s was £59,000. What also needs to be taken into account is the fact that you can claim the relief for up to two years retrospectively. This can often mean that, within twelve months of our engagement, we are able to submit three claims. In one small engineering client’s case, this has resulted in over £150,000 of corporation tax rebates within the last twelve months”.

 

 

How does Fiducia go about putting together a claim? “First and  foremost, we handle every aspect of the claim for the client – from analysing project work in order to identify qualifying activity; to formulating the technical case study to support the claim; to liaising with the client’s accountants to calculate the financial value of the claim and prepare associated tax returns; to liaising with HMRC’s R&D specialists to ensure that the claim is progressed speedily.

Ultimately, the client has a business to run and our job is to minimise the amount of time that the client needs to invest in the claim process.”

How much do Fiducia’s services cost?Because we go the extra mile to ensure that each claim that we formulate fully satisfies HMRC’s qualifying criteria, we can boast a 100% rate of success for client claims. This enables us to have the confidence to be able to employ a No-Win, No-Fee business model with Fiducia taking on all the risk in the project. We negotiate a fee with the client based on a percentage of the tax credit value we secure for them – and we only raise our invoice once the client is in receipt of their tax credit”.

What would you say to the owner of a business in the engineering sector who is not currently claiming R&D corporation tax credits? A short telephone call to us is generally all we need to be able to establish if, in principle, the business is undertaking qualifying R&D qualifying activity. Like many of our clients who have made that call, it could be the most financially rewarding telephone call that you have made this year. What’s more, if your business has a financial year end of 31st December, we strongly advise making that call sooner rather than later as your ability to submit a claim for 2015 will expire on 31st December.

Henry can be contacted at Fiducia Consulting on 01244 689311

or via email at henry.poultney@fiduciaconsulting.com

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