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Claims for R&D Tax Relief: A Second Option

Case Study – Engineering Company received a tax repayment of £1.1 million in a 3 year period

A second opinion

Many manufacturing and engineering companies have already claimed R&D tax relief to some extent and some of them may even have had a visit from specialist tax inspectors as a result of the claim. However there is often more that can be claimed and the Moore Stephens Innovation & Technology Group can provide a second opinion. Our team of specialist engineers have reviewed lots of claims and have submitted replacement claims to the HM Revenue and Customs (HMRC) where we believe the previous claims to be understated.

Case Study – Engineering company received a tax repayment of £1.1 million in a 3 year period

Our client’s auditor had submitted claims for R&D Tax relief to a value of around £400,000 triggering tax repayments of around £80,000. These encompassed a number of engineering projects but focussed purely on the design stage of each project.  Further, they had discounted all projects that had any element of customer funding. We carried out a technical due diligence exercise into all areas of the company’s activities and discovered after discussing with the technical engineers and finance team that:

  • A number of projects had been omitted. The auditor had only focussed on projects that had been successful. A number of projects had not met the desired objectives and whilst these were deemed to have failed, they can still qualify for R&D Tax relief.
  • Even though some had been funded by a customer, it is still possible for R&D claims to be submitted depending upon the facts behind the funding.
  • The design stage of a project is only one stage within a typical R&D cycle. In this instance we were able to include planning  stages, proof of concept stage and testing. This means that the financial costs involved with such a claim are that much greater.
  • In this instance, a claim under SME rules could be made. The auditor had submitted the claim under the Large Company Scheme.
  • The outcome was that qualifying costs were increased to around £1.5 million per year and the client company received a tax repayment after meeting HMRC to agree the claim of around £1.1 million covering a three year period. 
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