An introduction to Grantham Fabrication & Profile Services Limited
Grantham Fabrication & Profile Services Limited (“GFPS”) is an independent engineering company that specialises in the design and development of bespoke industrial grade plant and equipment to support and facilitate complex and safety critical processes across a range of industry sectors (agriculture and construction, oil and gas, transport, infrastructure and telecommunications).
In 2012, I approached the business owners George, Chris and Ian based on a couple of case studies they had put up on their company website about their project work. Engineers Chris and George were quickly able to see how many of their projects met the requirements for R&D tax credits. The Finance Director was, however, less sure. And so, with a healthy dose of scepticism from the Finance Director, we all worked together to collate the relevant project information and attribute qualifying expenditure. Fast forward almost 10 years and I still work with GFPS, having supported them with their R&D tax credit claims year on year.
The Finance Director’s fears subsided once he could see how a claim document goes together and that his fellow Directors, (engineers Chris and George) were able to see what is and isn’t qualifying work. GFPS capture information on work they believe is qualifying as they are doing the projects, ready for discussion with me at the end of the accounting period.
I fully understand scepticism around R&D tax credits. It’s not always easy to understand what HMRC are looking for and there is “worry” around getting things wrong and finding your company at the centre of HMRC scrutiny. As a chartered tax advisor, my reputation with HMRC and clients alike is essential for my success in business. I always operate with professional integrity and if I don’t believe there is a basis for work to qualify as R&D then I will say so!
Relating eligibility criteria
UK company with a relevant trade
GFPS is a UK Limited company within the scope of charge to UK corporation tax.
GFPS develops engineering solutions relevant to the supply of machinery and equipment – its trading activity.
Tax technical point: When considering project work, care is needed to only claim for qualifying activities that directly or indirectly contribute to the advance being sought. R&D tax credit claims should not include all costs attributable to the commercial project in its entirety.
GFPS creates improvements in engineering knowledge and capabilities to deliver complex functional and performance related goals underpinning the commercial specifications for the production of industrial plant and equipment.
The improvements sought are considered by Chris and George to be significant for GFPS’ field of work. The knowledge gained through iterative experimental design and testing work enables GFPS to deliver high-class technical capabilities in its products through improvements to underlying mechanical/electrical processes and structural schemes.
Through its work, GFPS 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 i.e., an advance can be defined in more than one way.
Over the years, many advances have been attempted by GFPS, 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): GFPS needs to make appreciable improvements to mechanical processes, devices and structural schemes through technological changes.
- Finding out how to construct plant and machinery that is lightweight enough for single person manual operation and manoeuvre.
- Developing plant with notable improvements to ergonomic operating positions.
- Finding out how to duplicate processes delivered by plant in a new way such that they can be achieved faster and with fewer operatives.
- Developing techniques and new designs to integrate requisite component parts into plant with ergonomic and spatial constraints.
- Finding out how to integrate mechanisms to improve the functional safety and efficiency of equipment when used on rugged terrain and in environments where there is high risk of electric shock.
Seeking an advance in science or technology as outlined above is just one part of the requirements. Your organisation will also need to demonstrate that the solution was not available by reference to baseline knowledge and capabilities in your industry as a whole. Your organisation will be iterating from known principles and approaches to create or extend knowledge and capabilities that represent genuine and non-trivial betterment.
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 GFPS’ case, Chris and George, the business owners – lead project engineers. I worked with Chris and George to help them understand and properly assess the challenges faced by GFPS in its work.
Chris, George 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? Taking the above examples of advances sought in project work, GFPS considered its engineering strategy in terms of:
- How to develop a solution that works effectively within the required parameters and which could operate within external constraints imposed by safety standards regulatory bodies?
- Whether a technological solution could be developed which was cost effective by comparison to existing plant and equipment manufactured by competitors?
- Could an alternative design (construction and material) achieve the requisite improvements in strength, performance, efficiencies and ergonomics?
- Could weight reduction measures be delivered without compromising rigidity, strength, safety and longevity?
- How to integrate new systems and components within the spatial constraints of the plant and equipment?
- Would the technological solutions work reliably and to an acceptable standard?
- Whether a solution could be designed that was capable of being manufactured cost effectively and with repeatability?
- How to deliver complex engineering solutions that remained user friendly and simple to operate?
GFPS’ solutions rely 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.
GFPS 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 the operation manager’s direction and supervision.
- Materials such as commissioned components scrapped as part of failed design attempts in prototypes.
- Utilities costs such as water, gas and electricity.
- Subcontracted out costs such as specialist testing during development phases.
Cash resources returned
The total cash benefits received from 10 consecutive R&D claims equate to c.£535k.
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.