Cast Iron Welding Services (CIWS) had been told repeatedly by tax professionals that their activities didn’t qualify under HMRC’s R&D tax credit scheme.
But after agreeing to a third review of the company’s activity by tax relief specialists Catax, its innovations finally got the recognition they deserved.
Not all CIWS’ work qualifies under the rules, but one project in particular caught Catax’s eye.
The company had been approached by a client who needed repairs made to a cast iron industrial strainer that was five feet in diameter and 40 years old. It had developed a substantial crack due to repeated heating and cooling over many years.
The object was large and heavy, and was not uniform in shape or thickness. It also contained impurities and other materials, mainly nickel. This meant the CIWS team couldn’t just rely on the techniques developed in the early days of the company for joining and repairing cast iron objects. Normally it would raise the temperature of the object in a furnace to 600degC, keeping it at that temperature for 12 hours, during which time the weld is applied, before allowing it to cool slowly for 24 hours.
But after one attempt, the team discovered that, due to its irregular shape, the heating and cooling process resulted in deformation and more cracking. Further experimentation was required, which involved adjusting the temperature and the rate of cooling to suit its unique composition.
Because the company was attempting to solve a technological uncertainty, its work qualified as R&D which resulted in a claim for £9,700 in R&D tax credits.
Now that CIWS understands how the scheme works and what qualifies, it is looking forward to accepting more complex commissions in the future, safe in the knowledge that much of the innovation required to try to solve unusual challenges will be eligible for this tax incentive. It will also help them limit the financial impact for clients.
CIWS is based in Coalville, Leicestershire, and was founded by current managing director Peter Palmer’s grandfather, Harold, in 1946. The company receives requests from all over the world because the work they do is so specialist. Cast iron has been widely used to make gates, farm equipment and machinery including pipes and automotive parts such as cylinder heads on diesel engines, cylinder blocks and gearbox cases. However, cast iron will need repairing periodically. Traditional arc welding is sometimes used but this is only a temporary fix as it eventually fails.
R&D tax credits were introduced by the government in 2000 to incentivise innovation, and result in either a reduction in a limited company’s corporation tax bill or a cash lump sum.
Many firms don’t realise the work they do qualifies as R&D, which is defined as any work that seeks to resolve a scientific or technological uncertainty, whether that’s a new process, product or service. R&D work does not need to have been successful to qualify and claims can be made up to two years beyond the end of the tax year in which the work took place.
Peter Palmer, Managing Director of Cast Iron Welding Services (CIWS), said: “Our company is pretty unique and we occasionally come up against challenges so difficult that we have to throw out the manual and invent entirely new processes. On this occasion, significant effort went into the material composition of the object and testing its response to different heating and cooling cycles.
“Making a claim for R&D tax credits has opened our eyes to the way we can use the scheme to support our work on more complex projects in the future.”
Kully Nijjar, associate director of specialist R&D tax consultancy Catax, said: “The overall size of this claim wasn’t as important to CIWS as knowing that R&D tax credits could allow it to take on many more clients with complex repairs in the future.”