R&D CAse Study
R&D Manufacturing Case Study
RDP was approached by a manufacturing company in the sports equipment industry. They had been claiming R&D tax credits for several years. But were becoming concerned about the stories they were hearing relating to HMRC’s position that up to 50% of R&D tax credit claims are in error. If HMRC were to carry out a compliance check and subsequently deny and/or claw back an R&D tax credit claim refund, it could have a substantial negative impact on the Company’s cash flow.
RDP assembled its team of specialists in the manufacturing industry including an engineer with experience in sports equipment manufacturing. We reviewed prior submissions and concluded the Company was at risk of a compliance check based on the information that had been supplied in previous R&D tax credit claim submissions.
The information previously supplied in the Company’s submission was vague and did not adequately address the criteria of technological uncertainty, technological advancement, and systematic investigation. Also, the R&D project was described at the product level, and not at the R&D level. Which is a common mistake and misconception. In addition, RDP anticipated HMRC would have questions on the costs claimed. As the project description did not address how the costs related (including the basis of allocation) to the R&D project.
RDP’s technical staff interviewed the Company’s key technical staff (the competent professional) to obtain information on the technological uncertainty (TU) for each R&D project. This was important as it is the TU that starts an R&D project and ends an R&D project when the TU is resolved. The TU’s also help identify the technological advance, as the advance is correlated to the resolution of the TU, whether successful or not.
Along with the technical criteria, RDP also identified the eligible R&D activities within the R&D project and then were able to allocate the costs to each of these activities. This was done by referring to the Company’s documents such as emails, notes, drawings, test results and prototypes created.
RDP then drafted a project description for each R&D project using HMRC’s additional information format for R&D tax credit claims. Furthermore, we correlated the activities and costs to the R&D project descriptions. In such a manner that the work done could be easily tracked to technological uncertainties, advances, and systematic investigation.
The Company is now confident that the R&D tax credit claim was supportable and reduced the likelihood of an in-depth HMRC compliance check. Additionally, the Company felt reassured that all eligible R&D projects, activities, and costs have been claimed.
Contact our team at RDP if you want to find out more about the R&D Manufacturing Case Study and how we can help your manufacturing company. To discuss further on 0208 214 1341 or email Jenni at [email protected].
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