Research & Development Tax Relief Example: Electrical Control Systems
Let’s see if we can shed some light on what qualifies for R&D tax credits in electrical control systems projects
22 September 2017
Let’s see if we can shed some light on what qualifies for R&D tax credits in electrical control systems projects.
So you’ve heard that companies like yours are receiving substantial sums in R&D tax credits from HMRC; money that they’re using to fund further research, recruit staff, purchase new equipment or to just ease the cashflow.
You’d like to do the same (and who wouldn’t), but aren’t sure what counts as eligible activity and therefore expenditure, and are concerned about the repercussions of getting it wrong. Play it safe by under-claiming and you could miss out on thousands of pounds that you’re legally entitled to; over-claim and you run the risk of inviting a dreaded HMRC inquiry.
Let’s see if we can shed some light on the subject.
In HMRC’s eyes, R&D for tax purposes is a project that “seeks to achieve an advance in science or technology [through] the resolution of scientific or technological uncertainty”. Crucially, the component parts of a qualifying project don’t necessarily need to represent an advance themselves to also be eligible, as offshore engineering company MESAL (Marine Electrical Services (Aberdeen) Ltd) discovered to their delight.
Although MESAL had developed a groundbreaking electronic control system for an all-electric drive cable tensioning system, they had done so using essentially industry standard circuitry and software components, albeit assembled in a novel fashion.
With ABGI’s unrivalled knowledge of the legislation, we were able to advise that the costs associated with the development of the software, which enables the new system to maintain the tension in the pipe being laid along the sea floor, qualified as eligible activity too as this was part of the overall advance in science and technology.
“We were delighted when ABGI UK told us we’d be able to recoup some of the substantial investment we had made in software development during this project,” says Pete Buchan, Design Engineer at MESAL. “I have to admit to being a little sceptical at first [but] just one month after submitting the claim we received a five figure cheque from HMRC.”
If you’re involved in embedded software, you could be in the same boat!