Claiming R&D tax credits in engineering for AMH

An introduction to Atherton Materials Handling

‍Atherton Materials Handling (“AMH”) is a highly skilled independent engineering company with specific expertise in creating industrial grade plant and equipment to support and facilitate complex and safety critical materials handling processes. 

AMH’s niche area of expertise is in the design and manufacture of large scale and unique Turnkey conveyor systems.

How it all began

I approached Dean and Karen Atherton in December 2012 to ask whether they were aware of the HMRC schemes for R&D Tax Credits or had received any support from their accountant in considering how these schemes might apply to their work to return cash funds via the corporation tax system.

Dean and Karen had no idea what I was talking about and invited me to meet with them at their premises to understand more. We met for about 90 minutes exchanging knowledge and understandings – I explained about the schemes and the types of activities they seek to reward.

Together, we considered the project work that AMH had undertaken during the 2 years preceding our meeting and identified several qualifying R&D projects. Dean was sceptical, commenting that this tax relief seemed too good to be true, rewarding his company for efforts that he considered to be “business as usual”. 

On the basis that I am a regulated Chartered Tax Adviser and would not be displacing any services provided by their accountant (I prepare the R&D Tax Credit claims and an accountant updates the CT600 with the figures and submits the claim document to HMRC), Dean and Karen decided to work with me. 

9 years on, we are still working together. 

AMH has been able to submit R&D tax credit claims every year since I first introduced them to these schemes for tax relief!

"Claire has supported our Engineering business since 2011. The service that she has provided to our business over the years has been incalculable to the Company." - Karen Atherton, Associate Director‍

Atherton Materials Handling's R&D eligibility

UK company with a relevant trade

As a UK Limited company, AMH is within the scope of charge to UK corporation tax. AMH develops engineering solutions relevant to the manufacture of plant and equipment so it also meets the criteria of being a relevant trade.

Purpose

AMH creates improvements in engineering knowledge and capabilities to deliver demanding functional and performance related goals underpinning the commercial specifications for materials handling plant and equipment. 

The improvements sought are considered to be significant for AMH’s field of work. The knowledge gained through iterative experimental design and testing work enables AMH to deliver superior technical capabilities in its products through improvements to underlying mechanical/electrical processes and structural schemes.

‍‍Focus

Through its work, AMH meets a key requirement of the R&D tax legislation: to seek an advance in technology.

There are a number of ways the BEIS guidelines for R&D recognise an advance and it’s not possible to say one is uniquely right; an advance can be defined in more than one way.

Over the years, many advances have been attempted by AMH, a few of these have been selected below by way of example to illustrate how an organisation can think about linking these to BEIS guidelines for R&D:‍

• ‍Improving something that does exist (para 9(c) of the BEIS guidelines): AMH needed to make appreciable improvements to mechanical handling processes, devices and structural aspects of conveyor products through technological changes. For example, in one of its programmes of qualifying work, AMH attempted to develop integrated structural, mechanical and electrical engineering methodologies to overcome site-based limitations in terms of weight bearing, structural integrity, space and capacity to achieve aggregate unloading rates of 3,500 tonnes per hour - 10 times the capabilities of legacy processing plant!‍
• Duplicating something in a fundamentally different way (para 9(d) of the BEIS guidelines): Through its problem solving work, AMH sought to extend engineering knowledge and capabilities to build a conveyor system in a fundamentally different way to duplicate the performance characteristics of standard engineering methodologies and materials. For example, AMH developed designs and methods based on scientific and mathematical principles to find a way to significantly reduce the amount of steel used in the construction of a conveyor support structure, attempting to achieve the same strength as a “belt-and-braces” engineering approach but built in a fundamentally different way.‍

Problem solving

Seeking an advance in science or technology as outlined above is just one part of the requirements. 

The presence of scientific or technological uncertainty is key, meaning that knowledge of whether something can be done or how to achieve it in practice is not publicly available or easily arrived at from what baseline knowledge is available in the public domain. This is a judgement call by a professional in your industry with relevant and appropriate knowledge and experience.

For most organisations, this will be a judgement call from the technical staff working on these projects, in AMH’s case, Dean, the business owner – a lead engineer. I worked with Dean to help him understand and properly assess the challenges faced by AMH in its work. 

"Claire’s approach is to research and analyse the facts with in-depth discussions and understanding of the projects. She takes time to ensure all the elements are collated and will guide the business and support them." - Karen Atherton, Associate Director

Dean and I discussed the key unknowns, the strategic questions asked as part of assessing whether objectives would be feasible for development or how to achieve things in practice – How? Would? Could? Whether? What? By way of example, taking the first qualifying project, AMH considered its engineering strategy in terms of:

• Could equipment be designed to accommodate dynamic integration with different loading methods?
• How to accommodate all supporting and mechanical designs in as lightweight a structure as possible?
• Could throughput performance goals be achieved in the challenging footprint available for offloading and moving out the materials?
• What would be the best means of maximising structural integrity given the varied dimensional challenges of the movement path together with extremely unfavourable ground conditions?
• Would it be possible to achieve noise mitigation features to meet the extremely low decibel levels set by strict planning permission requirements?
  

Basis

AMH’s solution relied on applying knowledge and scientific principles in mechanical, electrical and structural engineering to iterate methodologies, approaches and techniques to produce new or improved capabilities by reference to the baseline capabilities and progressive deviations from standard approaches or protocols collectively and uniquely employed for the purpose and focus of the advances sought.

Atherton Material Handling's financial outlay

AMH incurred in-house direct R&D costs on:

• Employed staff.
• Third party labour costs brought in to assist with projects that worked alongside its staff under Dean’s direction and supervision.
• Materials such as steel, fixings, commissioned components scrapped as part of failed design attempts in prototypes or in building equipment where it was not financially feasible to first build a prototype (First of Class principle).
• Utilities costs such as water, gas and electricity.
  

AMH incurred sub-contracted out R&D costs on:

• Outsourcing of elements of developmental design work to third party specialists such as structural engineers and electrical systems design engineers.
  

Cash resources returned

It was possible to go back and claim for work undertaken in the two previous accounting periods that ended before we first met up (2011 and 2012). I have been supporting AMH with its R&D tax credit claims for qualifying work in each subsequent accounting period – 11 years altogether (as of 2022).

The total cash benefits received from 11 consecutive R&D claims equate to c.£519k.

Think you have an R&D claim?

If you’d like to discuss a potential R&D project, book a call to explore your eligibility and start your tax claim journey.