Fiscale focuses on highlighting problem solving capabilities to create a new income stream for mechanical engineering experts.

research and design tax credits

Case Study - D&G Mechanical Engineering Solutions Ltd

Time and time again we are greeted with the phrase "but we don’t do R&D".

The reality is that in 80% of the conversations we have with SMEs, that could not be further from the truth!

D&G Mechanical Engineering Ltd proved to be another prime example of an extremely talented and competent company involved in R&D on an almost daily basis without realising it.

D&G Mechanical Engineering Solution are constantly pushing the boundaries designing new and innovative solutions, in the majority of cases from an idea or spark of inspiration from the business founder David Bowie. The HM Revenue and Customs (HMRC) criteria for eligibility centres on two key aspects - are new or improved products being created or does the design and development involve some uncertainty for which the answers were not obvious?

It was clear to Fiscale from the very first conversation with D&G that they were ticking both of these boxes by designing and building new and innovative machinery - just as they had been doing for over 30 years. Our challenge was to ensure that we got to the bottom of every project so that we did not miss anything that was eligible from the R&D Tax Credit claim.

The background

David Bowie started his family engineering business some thirty years ago after working in R&D for major companies in the sector. He eventually incorporated the company in July 2011 to form D&G Mechanical Solutions Limited. Over the years the firm has grown organically and now employs a team of 10, operating from a factory in Bury St Edmunds.

David spends the majority of his time on R&D and is supported by a team of fully qualified and highly skilled design and workshop engineers and metal fabricators. Their objective is to utilise the expertise and passion for engineering to produce machines and equipment that are at the leading edge of the industry.

D&G work across a diverse range of industries including the environmental services, construction, extraction, industrial and agricultural sectors. With projects completed for the likes of Cranfield University, Rugely Power Station and Bury St Edmunds Rugby Club there is no such thing as a typical customer or typical product.

Although research and development has been a core part of the business since inception the team, like many other engineering and manufacturing companies, had not associated their design capability with R&D. It was just something that they did to find the ideal solution to problems they encountered with existing machines used in the industries they service. D&G were surprised to learn that there was actually a Government incentive to compensate them for their efforts. They were keen to find out more from Fiscale about how they could benefit.

The challenge

D&G has established a reputation as a problem solver. The company identifies a problem or a better way of doing something and starts the process with a blank piece of paper.

The design engineers will then apply their knowledge and use cutting edge software design applications to create a unique specification which should remedy the situation. There is always a high degree of uncertainty involved in this activity, which is where the R&D Tax Credit eligibility comes into the fore.

Simplicity is a core element of the D&G ethos and is applied throughout all aspects of the business, particularly at the design development stage. The objective is to create modular, future proofed, low maintenance solutions - form always follows function.

Once the design has been researched and finalised the workshop engineers are then called upon to translate it into a reality, again the focus is on keeping everything simple. D&G utilise the simplest manufacturing techniques and processes that they can to achieve their objectives.

The solution

The introduction to D&G Mechanical Solutions was made through a Business Growth Adviser from the New Anglia Growth Hub.

A ‘basis for claim’ meeting was organised in February 2015 between David Bowie, Managing Director at D&G Mechanical Solutions, and Fiscale’s Technical Director, Stephen Bunting.

It soon became apparent that the innovative machines designed and built by the company required a very high level of technical and mechanical engineering expertise and definitely involved aspects of research and development. Stephen’s challenge was to understand each project sufficiently well enough to ascertain whether the activities were eligible under the R&D Tax Credit Scheme.

Several meetings and in depth telephone calls followed as Stephen and David worked together to ensure that all the relevant projects from the past two years were included in the claim. When Stephen was confident that no stone had been left unturned the draft report was compiled and sent to D&G for the directors to approve before being submitted to the specialist HMRC R&D Tax Credit team in Leicester.

The results

The initial contact with Fiscale took place in February and the cheque from HMRC arrived with D&G Mechanical Engineering Solutions in May. David and Jane were delighted with the size of the cheque that they received.

"I think it is fair to say that we have become real advocates of the R&D Tax Credit Scheme. We have recommended it to a number of business colleagues who we think maybe eligible. Of course it does take some time to set up but the returns completely justify the effort.

What we do for our customers is complex and highly technical, no two projects are the same. We went through our order history with Stephen, job by job, explaining the ins and outs of each one, to assess whether the activity undertaken was in fact research and development.

Assimilating the required information was a time consuming exercise however I believe it was a very useful process as now we have a greater understanding of what constitutes R&D. Stephen and the team from Fiscale also have more of an insight into our business. A second claim is now being worked on and it is proving to be a lot simpler to pull together.

This is the beauty of the R&D Tax Credit Scheme - it isn’t just a one off. As long as we continue to undertake research and development for the solutions we provide for our customers we can continue to claim. In effect we have created an extra revenue stream from just doing what we do.

The team from Fiscale are really lovely and easy to get along with - which is important when you have to work so closely together. From the outset we felt that we could trust Fiscale and were convinced that the time we were investing in analysing our projects would pay off.”

David Bowie, MD of D&G Mechanical Engineering Solutions


The conclusion

The relationship with Fiscale is ongoing. A second R&D Tax Credit claim is now being prepared for submission. The record keeping systems that were implemented following the first claim and Fiscale's deeper understanding of the business has ensured that pulling together the required information has been a lot easier this time around.

The directors have chosen to reinvest the R&D Tax Credit relief received from the initial claim back into the business.


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