Cashback Case Studies

Financial Print - Average £75k pa for 10 years

A financial printing business has received over £750k over the past decade via HMRC’s Research & Development tax credit scheme.

This is one of the best testimonies to the government’s reward to businesses that carry out innovation activities.  The consistency of the government support via the Research & Development (R&D) tax credit scheme is really showcased with this business.  The scheme was introduced in 2000/01 to reward companies for innovation, to ensure the UK remains a thriving and rewarding place for businesses to trade in.  This business has received a consistent average of £75k cashback annually for a decade since 2009.  This cashback is not taxed again, it is a contribution straight to the bottom line.  Many businesses and their advisors often associate the R&D tax credit scheme with sectors such as manufacturing, engineering, pharmaceutical, etc, yet this business in the sector of commercial printing highlights that a business in any sector can obtain this valuable cashback, however, it does take a specialist claims provider to correctly identify the nature of qualifying activities to ensure 1) that the company obtains maximum entitlement, and 2) that it doesn't submit a claim either directly or via an accountancy firm, that is not actually compliant with legislation.   On this latter point, it is important to recognise that HMRC may make an initial award of a tax credit or cashback, but if it later discovers that this claim is not compliant, it may result in a clawback.

 

A trading company that carries out any form of unique innovation may qualify for a year-on-year cashback from HMRC under this very generous scheme.  A first time claimant company can claim back two accounting periods.  A business does not have to be profitable to get this cashback, in fact a loss-making company can obtain an enhanced cashback, up to 33% of qualifying staff costs can be rebated. Some businesses have claimed and received small amounts, much less than they are entitled to. What catches many businesses out is that they believe this claim opportunity is an accountancy work-stream, whereas it is really about technology. The service provider that helped this business assigned a specialist IT analyst to identify all of the qualifying activities permitted within the government’s scheme rules.

IT Services - £110k

In less than three years this IT services business has received £110k cashback from the government for innovative activities. This is an incredible case study, but very typical of what happens.  This company does not produce any product but is an IT support business and integrator of third party products. This involves overcoming technical uncertainty which is by definition ‘research and development’, if the activity involves unique innovation.  Each year their accountant asked them if they carried out any research and development (R&D) activities and the client answered “no”.  This happens often because neither the accountant nor the client understand the full technical scope of HMRC’s R&D tax credits scheme.  The scheme was introduced in 2000/01 and this company was incorporated in 2004 and therefore could have claimed each year, however, there is a window of only 2 years for a back-claim.  This means the business had likely missed out for a decade on somewhere in the region of £250k free cash prior to the £110k they have received.

 

A trading company that carries out any form of unique innovation may qualify for a year-on-year cashback from HMRC under this very generous scheme.  A business does not have to be profitable to get this cashback, in fact a loss-making company can obtain an enhanced cashback, up to 33% of qualifying staff costs can be rebated. Some businesses have claimed and received small amounts, maybe £10k or £20k, which is much less than they are entitled to. Many businesses simply don’t believe me when I tell them how much they could be getting, or even that they are even eligible at all. In effect, they are saying no to free cash!  As a guide, the average UK SME received £53k for the last reported year. What catches many businesses out is that they believe this claim opportunity is an accountancy work-stream, whereas it is really about technology.  The service I introduced this business to required a specialist IT/software analyst to identify all of the qualifying activities permitted within the government’s scheme rules.

Software Developer - £250k

I set up the owner of this software/data analytics business 3 years ago on the HMRC Research & Development tax credit scheme and so far the business has received in excess of £250k cashback.

 

Many businesses and their advisors haven’t associated the R&D tax credit scheme with the digital sector, however, innovation including software development, writing APIs, algorithms, coding, Big Data analytics and app development, can all potentially meet the scheme criteria.  PAYE and even costs incurred from offshore developers may qualify for cashback.

 

What catches many businesses out is that they believe this claim opportunity is an accountancy work-stream, resulting in low claim values, whereas it is about technology.  The service I introduced this client to required a specialist IT/software analyst to identify all of the qualifying activities permitted within legislation.

 

This client case is the tip of the iceberg.  In the past 3 years I have been able to identify around £20m of missed qualifying expenditure that enabled businesses to benefit from this very generous government scheme. It is well worth asking for a free eligibility check, even if a business has previously benefited under the scheme, as claim values for the prior two accounting periods can often be uplifted by up to 200%, creating an unexpected and welcome cash injection to a business.

Electronics Manufacturing - £140k

An innovative electronics manufacturer in Dorset has qualified for £140k as cashback from the government via the research and development (R&D) tax credit scheme. The payout was four times more than the client had originally anticipated.

 

It was a familiar story, a business and their accountant trying to compile a claim, with neither party understanding the technical scope of the scheme, which is much broader than is often realised. It was a real bonus ball because the company was only set to receive c. £35k by attempting to compile a claim in conjunction with their accountant.  

 

The R&D tax credit scheme enables a business to recoup a large proportion of costs incurred for any form of unique innovation that requires overcoming technical or scientific uncertainty.  The qualifying expenditure can generate tax rebates, a cash payment (even when the business is loss-making), a deduction to offset tax on account or an enhancement of losses to reduce future tax liability arising.  Whichever way the client receives the credit, it is a bottom-line contribution to the business. 

 

Many businesses have previously claimed under the scheme and received small amounts, maybe £10k, £20k or £30k, which is much less than they are entitled to. What catches many businesses out is that they believe this is an accountancy work-stream, whereas it is really about technology. Because they have received a payment from HMRC, they assume they ‘have it covered’.  In reality, they may never know what they didn’t get! The service I introduced this client to required a technical analyst to identify all of the qualifying activities permitted within the government’s scheme rules.  This service doesn’t replace the function of a company’s accountancy firm, but is a specialist service that compliments the accountant’s work.  Many accountancy firms now refer their clients to a specialist provider.

Logistics Tracking - £309k in 3 Years

I first visited in this company in October 2014 to ascertain their potential to claim under the HMRC Research & Development tax credits scheme.  Within three years from that date they had received £309k in claim value. They created a bespoke app by adapting off-the-shelf software to enable real-time logistics tracking.  Aside from that bespoke development work, they enhanced their in-house IT systems which qualified under the scheme rules for a rebate of some of the staff and external development costs.

 

A client doesn’t have to be in an obvious sector such as manufacturing or engineering to qualify for an R&D tax credit or cashback.  Digital workstreams and internal IT projects often get missed because it requires a technical analyst to identify what’s in scope.  Maximised claims result from a technologist-led, not an accountancy-led, approach. That’s why I work with a group of scientists, engineers and software specialists, ensuring that an analyst with the relevant skill set and sector knowledge is aligned to identify all qualifying workstreams, thereby maximising the claim for each client.

Commercial Property Owner - £44k

My client bought the freehold of an office/factory in 2003 and could have claimed capital allowance relief anytime since ownership for items fixed within the building that are eligible for tax relief.  It’s a common oversight that a client’s accountant only claims for movable items for which there were invoices, but a building surveyor was required to identify and value fixed items upon which relief can be claimed, along with specialist tax advice.

 

In this case, £220k of the purchase price was apportioned as qualifying and the client will get tax relief on this at their prevailing tax rate - i.e. £44k at a 20% rate.  If the property owner were a higher rate tax paying individual, such as the 40% rate, then they would receive £88k relief.  This can be received as rebates from the prior two tax years, plus a writing down allowance year-on-year until it is used up, reducing tax liability for several years to come.

 

This is not a tax dodge, it is a genuine opportunity for any tax paying commercial property freeholder to benefit under long-standing HMRC legislation.  But a 15 year delay in claiming shows the need for a specialist claims provider.  The claim value would have been the same 15 years ago, as it is based on valuation at the time of freehold purchase, not on the current property valuation.

 

For more info on eligibility check out the FAQ

Manufacturing - £250k

I visited this innovative electronics company, with a manufacturing base in Dorset, early in 2016, and set them up on the HMRC research and development tax credit scheme. Less than two years later they had received a massive £250k as relief from the taxman!  The R&D tax credit scheme enables a business to recoup a large proportion of costs incurred for any form of unique innovation that requires overcoming technical or scientific uncertainty.  The qualifying expenditure can generate tax rebates, a cash payment even when the business is loss-making, a deduction to offset tax on account or an enhancement of losses to reduce future tax liability arising.  Whichever way the client receives the credit, it is a bottom-line contribution to the business.

 

“A trading company that carries out any form of unique innovation may qualify year-on-year for this cashback from HMRC under this very generous scheme.  A company can claim back two years, or must have at least their first set of trading accounts.  The £250k this company received was based on two retrospective claim years plus their current year. A business does not have to be profitable to get this cashback, in fact a loss-making company can obtain an enhanced cash payout, up to 33% of qualifying staff costs. Some businesses have previously claimed and received small amounts, maybe £20k or £30k, which is much less than they are entitled to. What catches many businesses out is that they believe this claim opportunity is an accountancy work-stream, whereas it is really about technology.  The service I introduced this client to required a specialist technical analyst to identify all of the qualifying activities permitted within the government’s scheme rules.”

Engineering - £97k

One of my Dorset-based clients in the manufacturing engineering sector has received £97k cash-back from HMRC for unique innovation under the R&D Tax Credit scheme.

 

It’s amazing how much unclaimed cash there is out there, often due to lack of awareness of the scheme which paid out £2.91bn last year to innovative businesses around the UK. Some businesses have claimed a minuscule amount due to not knowing the full extend of eligible activities that could qualify for the credit. It is possible to claim back any shortfall for the past two accounting periods. This can provide a fast cash-boost, paying out as quickly as 30 days from claim submission. Some clients have initially disbelieved in the reality of the scheme as they found it hard to believe that HMRC will pump money into their bank PDQ.  

Software - £90k

One of my clients has received a cash rebate in excess of £90k for the development of secure web-based apps running on mobile devices.  Many clients and their advisors haven’t associated the R&D Tax Credit scheme with software development, however, innovation including writing APIs, algorithms, coding, and Big Data analytics, can all potentially meet the scheme rules criteria.  Interestingly, this client incurs most of its expense from offshore developers.  However, they still qualified for the rebate of qualifying subcontractor costs because the costs were incurred by the UK registered entity. 

Arts & Crafts - £110k

It is very satisfying to calculate that one of my clients has received circa £110k cash-back entitlement since they went ahead with me in Jan 2015 with the government’s R&D tax credits claim process. 

 

They manufacture materials for the arts and crafts DIY market and they may have missed this massive tax free cash boost if their accountant hadn’t recognised the need for a specialist claims provider.  Imagine how many arts and crafts products they would have to sell to make £110k net! 

Digital - £15k - £165k

Digital innovators may qualify for government cash-back from project costs incurred, reaching back over two years - many don't know about it.

 

Here's a few recent examples of cash credits my clients have received:

Internet Marketing Co- £15k

Systems Integrator - £98k

ICT solutions provider - £164k

Internal software project - £32k

Internal web project - £56k

Managed IT services - £55k

 

Much of this gets missed either because businesses don’t think R&D is applicable to digital / IT or assume it is an accountancy workstream. It pays to get a specialist provider that can ensure maximum entitlement.

Big Data - £165k

Many solutions providers may not be aware that a proportion of Big Data developers' payroll and/or subcontractor costs may be eligible for a cash-back under the government’s generous R&D tax credit scheme.  This happened for my client, a Microsoft solutions provider, which received a cash credit of £165k!

 

Big Data is a term for data sets that are so large or complex that it is beyond the ability of typical database software tools to capture, store, manage, and analyse. The term "big data" often refers simply to the use of predictive analytics, user behaviour analytics, or certain other advanced data analytics methods that extract value from data, and seldom to a particular size of data set.  By overcoming 'technical uncertainty', this development work may often be defined as R&D for tax credit purposes.

Engineering / Manufacturing - £67k

Great news for my client in precision engineering, they just got back a credit from HMRC to the tune of £67k for unique innovation in their manufacture of precision machined components. Even though they work to client specifications, the innovation they added in the process, entitled them to the government payout. That £67k covered the prior two years, which is as far back as a claim can be made.

 

On a more somber note, they’ve maybe lost out on circa £500k cash-back, yes, half a million unclaimed cash since the scheme’s inception in 2000. That would have been handy cash spread over the years - an annual injection that is tax free and doesn't have to be paid back! How did they miss out? They didn’t think they were eligible for R&D Tax Credits and no one advised them. Hence the wisdom in engaging a specialist provider that doesn't charge a penny if there’s no gain.

Commercial Property Windfall - £130k

Would you say that £130,000 qualifies as a windfall? Well that's the estimated tax relief my client will receive for unclaimed capital allowances relief for two commercial properties they own. One property was purchased years ago, yet they’d been sitting on a goldmine and hadn’t been made aware.

 

An estimated 90% of commercial property owners in the UK have not claimed their full entitlement, due to being unaware of how this can benefit them, or due to various assumptions that have been made.

 

Regardless of when a commercial property was purchased, the freeholder or whoever paid a capital sum for a long-term leasehold, may well be eligible. Likewise, if a significant sum was paid for a refit, refurbishment or extension, there may be unclaimed value too. This applies to any commercial property - care home, car showroom, offices, warehouse, industrial unit, factory, hotel, retail, veterinary/dental/health surgery, etc. If the owner/s is/are taxpaying, there could be a windfall waiting to blow their way.

Systems Integrators - £99k

I was pleased to help a systems integrator to obtain £99k tax credit from HMRC as a rebate of staff costs incurred in developing client solutions. Many software and ICT solutions providers have never claimed under the government’s R&D tax credit scheme, yet they are missing out big time. Others have claimed minimal amounts far short of the maximised potential. I have numerous examples of this relating to software development, Big Data, 3rd party integration and even in-house IT projects.

 

Up to 33% of employee costs can be recouped for the past two years and every ongoing year, for bespoke development projects.

Construction: Eco Housing - £230k

One of my clients in the house building sector received £230k as a government cash-back for the development of sustainable housing design. It’s a brilliant example of a virtuous circle, with government investment into businesses that seek to make a difference and then receive a reward for helping to keep the UK at the forefront of innovation, to fuel further growth.

 

The Sept 2017 gov statistics on the R&D tax credits paid out in the last reported year, shows that Construction as a sector does not claim a significant amount of the total payout. This often happens because an assumption is made in certain sectors that a company doesn't do any R&D. The official scheme definition states that for an activity to qualify there must be an ‘appreciable improvement’ in the intent or outcome of a qualifying workstream. When the analysts I work with discuss with a client what they actually do, it’s amazing what qualifies as R&D for the cash-back!

 

I find it fascinating visiting companies each week that are at the forefront of innovation and it’s rewarding that around 90% of companies I visit are eligible for this government funding but didn’t know they were, had been misinformed, or had under-claimed.

Mobile Apps Development - £185k

I met this owner of this business in Q1 2016 and by Q1 2018 they had benefited from £185k cashback under the HMRC Research & Development tax credit scheme. Many businesses and their advisors haven’t associated the R&D tax credit scheme with the digital sector, however, innovation including software development, writing APIs, algorithms, coding, and Big Data analytics and app development, can all potentially meet the scheme criteria.

 

The £185k this company received was based on two retrospective claim years plus the current year. A business does not have to be profitable to get this cashback, in fact a loss-making company can obtain an enhanced cashback, up to 33% of qualifying staff costs. Some businesses have claimed and received small amounts, maybe £20k or £30k, which is much less than they are entitled to.

 

What catches many businesses out is that they believe this claim opportunity is an accountancy work-stream, whereas it is really about technology.  The service I introduced this client to required a specialist software analyst to identify all of the qualifying activities permitted within the government’s scheme provisions.

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