Experts provide insight into how logistics firms can use R&D tax credits to begin to take advantage of
Evidence suggests that more awareness is needed of the range of applications for R&D tax credits in the UK logistics industry. With HMRC data revealing that the sector made up 0.9% of UK R&D tax credit claims, those operating in the industry are encouraged to consider whether they might be eligible.
For those that did make a claim from the sector, the average value of a claim was £70,588 in 2017-18.
What is R&D tax credit for logistics?
In the UK, companies are able to claim tax relief for their R&D activity. The schemes for SMEs and larger companies are both administered by HMRC. Typically SMEs get back up to 33% of the amount they’ve spent on qualifying R&D. Large companies could get more than 10% of their R&D spending refunded.
According to HMRC, to get R&D relief, you need to create a new product, service or process, or change an existing product, service or process for the better. Amid increasing pressure on the logistics sector to improve efficiency, meet environmental targets and streamline communications, many companies are simply unaware that they are carrying out compliant R&D activities.
Dominic Bartholdi, Head of Business Development at R&D tax credit specialists GovGrant, provides expert insight into R&D claims in the logistics sector:
Why the logistics sector is missing out on savings
Companies from all sectors have the potential to claim UK R&D tax relief. We know that logistics businesses of all kinds are benefitting from innovative technology which is constantly streamlining their processes and allowing them to work more efficiently at greater scale. R&D claims can come from all types of improvement, however small.
How much innovation is there in the logistics sector, and what qualifies as expenditure?
Companies are always trying to find new ways to make transportation of goods more efficient, profitable and sustainable, whether via simple changes to working practices or major new technological developments. Keeping drivers in the loop safely while they are on the road, and ensuring that all opportunities for business are taken advantage of along the way, are key priorities in the sector at present.
Examples of qualifying expenditure can include:
- New and innovative ways of being more efficient
- Maximising use of vehicles to consolidate multiple deliveries
- Using GPRS to assist in finding routes which are more fuel efficient and allow for multiple drops
- Vehicle tracking systems to accurately position and locate vehicles and ensure that route and driver times are lowered
- Ways to ensure vehicles are in the right place at the right time, including for the start of the next day
- Integrating companies’ own systems with those of their suppliers, customers and/or other hauliers to increase efficiency for replenishment
- New automated systems for more accurate business reporting and analysis
- Management of internal stock movement to ensure that goods are shipped in and out based on FIFO (first in first out)
What advice would GovGrant give to business owners and transport managers in the logistics industry who are unsure whether they should apply?
Seek specialist advice on R&D tax credits in the first instance. Our priority is to get you the maximum benefit you deserve for innovating. Initially we will assess the financial viability to make sure it’s worth making a claim, by reviewing your management accounts and tax computations. We don’t want to waste your time so we’ll give you realistic feedback from day one.
If there is a good chance of making a claim, we then arrange a meeting with each relevant department or site. This is when our specialists find out exactly what is qualifying R&D. We never ask the question ‘Tell me about your R&D?’ but instead have a detailed conversation to understand your whole business and the projects you are undertaking. When you meet our specialist, it will feel like you’re talking to a colleague rather than your advisor.
Are there any triggers that GovGrant would look for in a logistics company to identify a potential claim?
There are far more activities that qualify as R&D than people would think – it doesn’t always have to be groundbreaking or particularly significant. Even time spent looking into why a job was less efficient than expected, making changes to existing IT or seeking ways to save money (whether successfully or not) could be qualifying R&D activity.
Dominic Bartholdi, R&D tax credit expert, GovGrant