The missing millions...
There is no doubt that the pharmaceuticals and chemical industry in the UK has a significant impact on the economy. The numbers are impressive:-
- Accounts for 15% of total manufacturing in the UK
- Contributes over £60 billion to UK Plc. turnover
- Is one of the UK’s largest exporters
- Exports in the region of £53 billion
- Accounts for over 18% of the UK’s exported goods
- UK is fourth largest chemical producer in the EU
- 322,000 employed in the sector
- Invests over £5 billion in Research and Development (R&D) per annum.
(Source: CBI Global Futures Report)
So we have over £5 billion invested in R&D by the UK’s pharmaceuticals and chemical industry; that’s more than 28% of the total industrial R&D spend in the UK according to a market research report by AMA.
You might expect that the % of claims made for R&D Tax Credit relief by companies operating in the sector would reflect this figure - wrong thinking! Fact is that in the financial year 2012-2013 only 3% of the total claims for R&D Tax Credit was received by companies classified under the SIC codes for Pharmaceuticals and Chemicals. This represented just £41.4 million.*
This level of relief compared to the huge investment in R&D within the sector begs the question - why?
After working with a number of different companies in the chemical sector we think we know the answer to this question. It comes down to awareness. All of the chemical companies that we have worked with over the course of the last two years were not previously claiming R&D Tax Credit relief either because they were not aware that the incentive existed or did not understand how it could benefit them.
Our clients within the sector all share common traits:-
They are developing formulae for a product.
This involves developing the formulation for a new product either as an own label product or on behalf of a client
The new product development process involves a degree of uncertainty.
Any new product containing chemicals will, by definition, involve uncertainty as the manufacturer combines different ingredients together to produce an end product. The interaction between the various components of the chemical will require comprehensive testing. Quality, stability, volatility, safety and compliance will all need to be analysed and carefully monitored and assessed.
Investing in research and development is key.
Developing new products and processes is a crucial element of their business success strategy. They have to innovate to retain their position as market leaders.
Our clients within the chemical sector:
Over the last two years we have built an interesting portfolio of clients operating in the UK chemical sector, including the following companies:-
Founded in 1995 MPM Consumer Products Ltd in Manchester work with clients primarily in the household and personal care sector. They produce around 150 new and innovative product formulations a year and can create a product from the concept stage through to the development of the manufacturing process. Product development, evaluation, testing and statistical results analysis are all carried out inhouse and are a day to day part of the development process.
Travik Chemicals (UK) Ltd is an industrial chemical manufacturer based in County Durham. Since 1974 the company has produced thousands of formulations for customers in a diverse range of industry sectors including automotive, janitorial, catering, industrial, marine, agricultural, equine, pet care and household. Travik develops, manufactures and packs products for its customers and has the capability to develop bespoke products for any application.
Bury St Edmunds based Maclin Sourcing Solutions Ltd develop, produce and supply a range of cleaning, hygiene and maintenance products. They have clients in the industrial, institutional, catering, food processing, medical and care sector, engineering, printing, retail markets and facilities management sectors. They have also produced a number of specialist products including an Ultra High Temperature Matt Grey Paint for the Fireplace Industry and a Salt Free Ice Melt product.
Complete Pool Controls Ltd is based in Cheltenham and produces recreational water treatment chemicals for hot tubs and swimming pools. Established in 1995 they offer a solutions led range of products for swimming pool and hot tub owners supplied through a network of dealers. The company has the capability to create speciality and problem solving chemicals for commercial use.
The value of the claims successfully submitted for R & D Tax Credit for the chemical companies we work with ranges from just under £24,000 up to £200,000.
Are you a chemical company?
If you produce chemicals then why not get in touch? Just like the chemical companies mentioned above you too could qualify for what is effectively “free money” from HM Revenue & Customs.
(*Source: HMRC Working Paper)
Want to find out more about R&D Tax Credit? Call 01440 708333 for a no obligation chat.