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R&D activity drives the nature of the projects my organisation undertakes. How do I go about claiming R&D relief?

Our client
Our client is an owner-managed business that designs and manufactures large scale engineering plant.

Their challenge
The organisation had not previously considered preparing R&D claims as they were uncertain that their activities could be eligible for the relief. They needed an understanding of the extent to which their activities were eligible and the potential benefit that they could realise.

Our client’s engineering development process often requires full scale ‘first in class’ equipment to be designed, built and then tested and further developed at the customer’s site under normal working conditions. The challenge was to correctly identify at which point in the development process the R&D finished, and then to eliminate the routine production process from the claim.

A further challenge arose from the fact that the company qualified as both an SME and a large company in different periods. This complex situation needed to be fully understood and the effects incorporated into the claim methodology and results.

The Deloitte approach
Deloitte conducted an initial investigation which identified that some of the key support for the earlier periods was unavailable. This situation arose as there was no contemporaneous documentation produced to assist in the later preparation of an R&D claim. Staff changes over that period also contributed to this gap in our client’s knowledge. In response to this investigation, Deloitte developed an approach that would enable an understanding of the all technical areas of the business over the five year period, and that would track the associated costs.

In the first phase, Deloitte undertook a preliminary scoping exercise to understand the nature of the development and manufacturing activities. The client’s technical and finance teams were involved in this process to provide them with an understanding of the criteria for eligibility. This process identified a substantial potential benefit.

The next phase was to develop an efficient claim methodology and produce the detailed claims and supporting documentation on the eligible activities and the associated eligible costs.

To achieve this, Deloitte used a combination of the client’s internal reports and organisational structure data in order to identify which key individuals were involved in which projects undertaken during the relevant time. Next followed a series of detailed conversations with the client’s engineers, the purpose was to provide our team with a sound understanding of the technical activities our client undertook during the period under review. These conversations were conducted by members of the Deloitte R&D team who are experienced engineers and can therefore combine their technical expertise with an understanding of the eligible criteria to optimise the claim benefit.

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