The engineering firm CMB was doing complex, challenging work and stood to benefit from a substantial research and development (R&D) tax credit claim. But then an HMRC letter arrived asking for more detail.
Initially, CMB was frustrated by the added delay and anticipated an adversarial approach from the HMRC, based on previous (non-R&D) experience. But as one of our clients, the firm had access to our enquiry support service and an experienced, multi-disciplinary team including former HMRC inspectors.
HMRC’s enquiry into the claim was resolved quickly, cordially and with minimal additional time commitment on the part of CMB’s busy experts. Most importantly, the company received its original claim value in full with no deductions or concessions.
While HMRC enquiries into claims prepared by ForrestBrown are rare, they do happen. And when they do, ForrestBrown steps in to protect our client’s business. A recent example was CMB Engineering’s R&D tax credit claim.
CMB is one of the UK’s largest independent building services contractors. Their electrical and mechanical engineering R&D often includes HVAC innovation, bringing solutions to many high-value clients like the BBC, IQE, Celtic Manor and Cardiff City football club, as well as several influential businesses in the construction sector.
Technological complexities frequently arise due to a variety of factors, including the environment in which the structure is to be built, cost constraints imposed by the developer, or space constraints limiting what is possible.
Given the complex nature of the work, ForrestBrown frequently works with HVAC companies to help them reap the full benefits of their innovation with R&D tax credits.
CMB – like many other HVAC businesses – is ideally suited to make use of R&D tax incentives. Despite this and its claim being comprehensive and well-prepared, HMRC wanted more information on the project activities and costs included in the R&D claim.
As one of ForrestBrown’s clients, CMB was able to rely on an experienced, multi-disciplinary team of experts to resolve the issue. “ForrestBrown quickly reassured us that our original claim was robust and that it was worth defending,” says Mike Camilleri, CMB’s finance director.
“They assembled an A-team of experts to help resolve the enquiry, and we were quickly encouraged that the enquiry would end successfully with HMRC paying us what we deserved for our investment in innovation.”
It’s important to remember that an HMRC enquiry is a reciprocal process, rather than an event where a client has no power. They are soliciting a response, not making an accusation. ForrestBrown makes a point to ask for clarification, answer questions and push back.
“ForrestBrown took complete control of the process and proactively rang the inspector who they already knew,” Mike says. “They were able to determine what the inspector wanted to check and what information would be useful.”
ForrestBrown acts as an intermediary between the client and the inspector. This reduces the time clients need to spend on the issue. With CMB, ForrestBrown’s sector specialists coordinated directly the company’s technical team to gather the information the inspector needed, sparing their valuable time.
Are you facing an HMRC enquiry? Find out more about ForrestBrown’s Enquiry Support Service.
ForrestBrown resolved the enquiry within three months; a relatively quick turnaround time. More importantly, the enquiry experience has provided CMB with a solid base for future R&D tax credit claims.
The successful claim and swift resolution of the enquiry has emboldened the business. And as Mike says, it has enabled CMB to reinvest and further reinforce the collaborative and innovate approach to successfully delivering technically challenging projects.
The incentive is more than a boost to cash flow. A successful claim, as CMB’s example illustrates, has a psychological effect, too: suddenly, innovation and projects that seemed out of reach become reasonable. It’s a virtuous circle of investment – and that’s when a culture of R&D begins to form.
An enquiry letter from HMRC is not set in stone or an accusation. It’s simply a request for information. Many businesses – especially SMEs – harbour a fear of the tax authority. The tendency is to shy away from any contact that could be avoided.
But this antagonism is more imagined than real – especially in regards to R&D tax credits. The incentive has been set up by the government to encourage businesses to innovate. It enjoys widespread political support. HMRC will ensure any spurious claims are denied, but its intention has never been to catch businesses out.
That said, there are things you can do to minimise the likelihood of an enquiry on your claim. Namely, you can work with experts like us. We’ve worked closely with HMRC for years and our enquiry rate remains low.
On that rare occasion, our multi-disciplinary team of tax advisers, sector specialists and former HMRC inspectors respond quickly and work closely with the tax authority to get it resolved.
If you’re an engineering or construction firm and want to find out more about working with ForrestBrown and the value we bring, contact us today.