How we helped a highly skilled group of software and systems development engineers, who had recently started their own development company, claim R&D tax relief.

This Nottinghamshire company had specific expertise in applications based integrations and secure, highly scalable, collaborative real time working and were looking to create a unique and innovative native platform to support interactive working for schools.  Elements of functionality from 3rd party software, API’s and browser technologies were being hashed up, manipulated and enhanced in order to create a bespoke core platform and further enhance systematic capabilities with unrivalled scale, dynamism, performance, functionality and features.  Nothing like this had been attempted in the education sector before.

Having been instructed by the company, their accountant quickly spotted the potential for the work to qualify for the generous R&D tax relief incentives offered by HMRC and put them in touch with Bedrock’s R&D specialist to explore the opportunity further.

Client challenge

As a start up, cash is king.  The director shareholder was bankrolling the development work and had not yet taken a salary from the business.  Seeking opportunities to fund the on going development work had initially led the business to consider R&D grants, but these were for minimal amounts of £3-£5k and required a lot of effort to put a case forward and monitor the use of such funds.  Some of the individuals working in the business had heard of R&D tax relief from previous employments but had not realised this was potentially available to them and how much the cash benefit under this relief could exceed possible R&D grants and be accessed much faster in a comparatively simple process.

How did Bedrock help?

Bedrock held discussions with the company’s technical leads to explain the relief and consider with them how the activities undertaken to date met the definition of R&D for tax purposes based on the BIS guidelines and the HMRC guidelines.  Bedrock further explored the qualifying cost categories to ensure the maximum possible value associated with the qualifying work was brought into the claim for relief.

The development technical information, together with the costs was discerned, interpreted and documented by Bedrock in a robust and comprehensive supporting claim document covering all claim periods from start up to present.  This brought the company right up to date with its claims efficiently and maximised the value returned to the company quickly.

Business impact and benefits

Bedrock was able to lead the company through the pertinent information required to pull the claim together and produce the report to HMRC requirements.  This took away uncertainty and confusion meaning the claims filled with HMRC were correct and compliant.  Importantly, the personnel in the business were not spending time away from their important and time critical development work to get to grips with HMRC literature and tax law.

Financial benefits

The R&D tax relief generated from the claim was a valuable circa £32k for a single accounting period, received as a cash credit from HMRC. It’s worth noting that as part of the process to secure this claim, the potential to claim EU State Aid grants was discussed.  Bedrock was able to advise that if such grants were claimed then this did impact the amount of R&D tax relief that could ultimately be claimed.

The company was then able to make an informed decision as to which route was more viable.  In this case, the value of a State Aid grant, if successfully awarded, would have been a single lump sum receipt of £3k.  However, if the grant was taken, this reduced the amount of R&D tax relief available to less than half of the value claimed for the same accounting period … and for many future accounting periods – the loss of cash injections/cash tax savings over the years could have been immense had the position not been clarified by Bedrock.

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