We began working with an Automotive Coatings company around 7 years ago. They had never submitted an R&D claim before.
On an initial tour of the factory and from speaking to the Directors/Technical staff it became apparent that many of the activities they were undertaking would qualify for an R&D tax credit claim.
The company coated plastic and metal parts for various industries including automotive and white goods. Since much of their work involved putting pre-manufactured parts through a coating process and the end coating finish rarely changed, they did not consider that they were undertaking any form of research and development.
We educated them on the concept behind process R&D where by working on the process they might be able to achieve efficiency and cost savings without affecting materially the properties of the end product.
Having explained this, we were able to work with the client and define a number of projects that involved process innovation leading to more efficient processes. One of the projects we found was that the company had undertaken a large scale task to develop Heated De-ionised Nitrogen as a paint carrier instead of normal air. This had involved numerous trials and modifications to the paint plant and computer software controlling the plant.
The new process reduced paint usage by 30% on average and paint thinner usage by 20%, while saving on energy costs, wastage and environmental emissions.
We worked with the client’s technical people to gather information on the project so that we could compile a comprehensive report on their R&D activities. We also worked with the finance staff to gather financial information regarding R&D expenditure in the year including wages, materials, consumables and subcontractor costs.
On completion of information gathering, we were able to write a comprehensive report in language acceptable to HMRC which defined the key benefits and scope of the R&D work without getting into too much technical detail. Accompanying this report, we prepared detailed R&D computations and workings to support the application included within the corporation tax computations.
In the first year that we worked with the coatings company on the R&D claim, the company had already paid Corporation tax for that year. Once we submitted the claim, we were able to obtain a substantial refund for them within 5 weeks.
In subsequent years we have worked closely with the company to help them build and record R&D activities within their normal day-to-day activities. This has allowed the company to register an R&D tax credit claim each year for the last 6 years.
To date we have helped save the client over £1m. They have recently used this cash to buy and fit out a brand new coatings facility with a larger capacity. Taking into account contracts currently under negotiation, this new facility should allow the company to treble its turnover from £8m to £24m over the next 5 years and create over 100 new jobs in the area. This would enable a 5-fold increase in net profits and a similar multiple increase in GVA, adding substantially to economic growth.
The Directors acknowledge that without the cumulative cash generated by the R&D claims they would not have had enough resources to expand into the new factory and win these new contracts.