How we improved our financial resilience with R&D tax credits
Greater Birmingham Chambers of Commerce
This article is part of the Greater Birmingham Chambers of Commerce’s Raise the BAR (Business Adaptability & Resilience) Campaign, sponsored by Western Union Business Solutions. For more campaign content click here. This campaign provides Chamber members with a platform to share learning and inspiration on this agenda. All views and opinions expressed below are those of the author only.
By Helen Bates, CFO, Greater Birmingham Chambers of Commerce
As a Chief Financial Officer, carefully managing liquidity is what I do. Just over two years ago I was surprised to find out that the Chamber qualified for R&D tax relief and we’ve been benefitting from it ever since. I know there are thousands of businesses who could no doubt benefit from it too but don’t yet realise it. Through this Raise the BAR case study I hope to encourage more companies to look in to it and, in turn, improve their financial resilience.
The R&D tax credit regime effectively provides significant tax reliefs to all types and sizes of companies taking part in almost all development work, including software development and the new application of existing technologies. For SME’s in particular, it is pretty significant, allowing them to deduct a total of 230% of qualifying costs from their yearly profit (click here for more information).
We started to explore R&D Tax Relief for the Chamber over two years ago. Our Chase chamber President, Martyn Jupp, mentioned that he had made a successful R&D claim to HMRC and suggested that the Chamber should talk to the consultants he worked with on this project. Gary Morris from GovGrant came to see us, we talked through the IT project we had been working on and he felt we would be able to make a successful application.
We were allocated a Technical Specialist who came in to talk to me and the Director of IT about the work we have done to enhance our business processes through automation and system integration. We discussed the problems and opportunities the project sought to address, and the innovation we were seeking. Primarily we wanted to reduce or remove manual intervention between our CRM and the Finance system by integrating different business systems. Discussing the difficulties we encountered and the unforeseen issues which arose all helped to give a picture of the project and the steps we had undertaken to successfully implement these changes.
With the Technical Specialist we drew up a list of expenses that we had incurred solely in order to achieve the project outcomes. We had worked with external consultants, due to the complexity of the project and the need to ensure the technical competencies of our system but our costs also included internal staff costs and even office costs. There was a lot of detail required but as it was specific to the project we were able to set up a template we could use in future years as the project continued.
We had to provide job descriptions and there was a check by GovGrant that our claim was reasonable – they have a 100% success rate as they don’t proceed with any claim unless they believe it will be successful. They have in-house accountants who confirm what costs can be claimed and how they are apportioned. Our Technical Specialist was appreciative that we got all the information together for them very quickly – but there are financial benefits of starting to claim as early as possible, as there is a limit to how far back a claim can be made.
This work resulted in a summary of qualifying R&D activities, prepared by GovGrant, which confirmed that the qualifying R&D activities comply with current legislation and the HMRC’s own manual on Corporate Intangible R&D. It confirmed that the activities carried out by the Chamber are eligible for corporation tax relief.
We have claimed R&D relief in two tax years and are just about to claim a third. The amounts approved are not huge, but for a not-for-profit organisation such as Greater Birmingham Chambers of Commerce, these are very welcome reductions to our corporation tax bill. We have to manage our liquidity position carefully as we employ 100 people and support over 3,000 members, and we also manage a final salary pension scheme. To be able to connect, support and grow our member businesses, it is important to maximise our income and reduce our costs wherever possible.
Over the last several years our financial resilience has been tested, as the organisation shrinks and expands depending on contracts and income streams. We are conscious that the Chamber has lasted for over 200 years and we want to make sure we continue for many more.
I didn’t think the Chamber was the sort of organisation which could make a successful R&D claim – we are not a manufacturer or IT company – but when I discussed the potential opportunities with GovGrant it became apparent that we are continually investing in improvements to our business which would qualify.
We would like our members to consider a review of their activities – we are all innovating in our different ways and it might be possible to make a claim. I urge you to think about your own investment in improvements to your business; it isn’t as difficult as you may think to make a claim and it might make a useful difference to your bottom line.
To find out if you qualify for R&D tax credits contact Gary Morris from Gov Grant on: t 01727 738 600 e Gary.Morris@govgrant.co.uk.