R&D TAX RELIEF CASE STUDY
Barclays plc is a British multinational bank and financial services company headquartered in London. It is a universal bank with global reach, offering products and services across personal, corporate and investment banking, credit cards and wealth management
Barclays has two divisions with large IT departments—GRCB and Barclays Capital. While Barclays Capital made an R&D tax credit claim in 2003, GRCB had never done so.
Moreover, when Barclays Capital had made a claim in 2003, the tax department was uncomfortable with the process to identify projects and capture eligible costs. This caused some uncertainty within the tax department as to whether HMRC would accept the claim.
Simply put, Barclays did not feel confident that it had properly identified R&D projects and all eligible R&D costs, nor had adequate documentation to support the claim.
Three Important Reasons Why Barclays Chose RDP
We believe that RDP Associates Inc. (RDP) was selected over other competitors (including the Big Four accounting firms) for 3 main reasons:
- Our extensive experience with filing for government grants and tax credits: At the time Barclays engaged RDP, the program was new. However, the R&D tax relief rules in the UK are based on the same criteria as Canada, so RDP brought with it over 25 years of experience in assisting companies optimize their R&D claims.
- Qualified team: the RDP team also includes accredited technology professionals. Jeff Laks (MSc. Computer Science) who worked on the Barclays case was involved in setting R&D guidelines in the area of software/IT for Canada and has prepared hundreds of claims for clients ever since. RDP has also participated since then in stakeholder groups and provided input to HMRC on policies.
- Demonstrated expertise: RDP demonstrated its expertise by starting off with a small assignment to identify eligible R&D projects within GRCB. In a short amount of time, our R&D specialist had identified 12 large projects for 2005 and 2006.
RDP Adopted a Detailed, Two-Phase Approach for Our R&D Tax Credit Claim Preparation
- The first phase was to identify all eligible projects. In addition, a very rough estimate of the eligible costs was provided for each project. A report was then generated outlining this cost/benefit of proceeding with each project.
- The second phase involved an in-depth review of each project. RDP interviewed key technical primes such as project managers to verify project eligibility. Each one was assessed against DTI guidelines such as technological advancement, technological uncertainty, appreciable improvement and systematic investigation.
RDP’s “project description” detailed why it qualified as an R&D project and provided available documentation to support the claim. This included salaries and labour allocation sheets as well as information which demonstrated technology development through minutes of meetings, documented IT revisions, emails, notes and logs.
RDP also worked with the accounting department to obtain the necessary financial information of employees and individual contractors who worked on R&D projects as well as the software tools used.
Once RDP had drafted its project descriptions and detailed the costs, we carried out a final review with the technical primes to ensure that all the facts gathered by us were accurate and as described in the summaries.
After the application package was completed, RDP worked with the Barclays tax department to prepare a schedule for the R&D claim submission to HMRC.
How RDP’s Systematic Information Gathering Process Simplified R&D Claim Preparation
Most organizations have a list of projects that they work on during the year which is helpful in identifying the key technical people that were involved. RDP meets with these key individuals to gather project information and assess the R&D ligibility criteria against the work carried out. Company staff must meet with the RDP team within a reasonable time frame to ensure timely claim preparation.
One of the main difficulties in dealing with large financial institutions like Barclays is identifying and meeting with the right personnel. To overcome this challenge, RDP provided an overview (in a meeting format) to all the Barclays COOs in the IT department for each service line. They were briefed on the financial benefits of the R&D program, RDP’s claim preparation process, the information we required, and the time commitment needed from the Barclays staff.
Once RDP received “buy-in” from the COOs, we provided them with the IT projects that would be reviewed. The COOs then identified the key technical prime on these projects to be interviewed by RDP. Barclays also supplied a contact within the tax and IT departments to assist us in scheduling meetings so that information was gathered in a timely manner.
Our systematic approach provided a good framework for carrying out the assignment.
RDP Maximizes R&D Tax Returns and Implements System to Speed Up Claim Preparation
Here is an overview of RDP’s Three key achievements:
- Optimized returns: For the accounting periods 2005 and 2006, GRCB substantially increased the R&D claim
- Efficient system to document information for R&D tax credit claim: After reviewing the eligible projects and meeting technical primes, RDP advised Barclays to implement a system that would identify, capture and document R&D efforts quickly and efficiently. We recommended quarterly reviews by RDP to ensure the system was capturing the correct information and that projects, activities and expenditures were managed efficiently.
- Reduced staff involvement in claim preparation: On average, RDP only required up to 1 hour of any individual’s time. The only exceptions were the two individuals who assisted RDP on an ongoing basis to arrange interviews and ensure the smooth flow of information and documentation during the claim preparation process. These individuals spent approximately 15hours in total.
Barclays Retains RDP for Future R&D Tax Credit Claims
This testimonial we received from Iain Mackinnon, Tax Director, Barclays Capital says it all: “RDP did an excellent job preparing the R&D tax credit claim for Barclays. They showed strong technical knowledge and learned very quickly the key components of our business. The project was well managed which ensured timely completion and RDP acted as first point of contact for our technical staff. Based on this, we anticipate using RDP to continue to prepare our claims going forward.”
RDP is proud to say that our services were sought to complete the R&D tax credit claim for Barclays Bank and other areas within the financial institution for 2007 as well. RDP also assisted in implementing a system that we suggested to make it easier for identifying, capturing and documenting R&D claims.
As in all previous cases, RDP’s experienced staff, proven track record in identifying and maximizing an R&D claim while minimizing staff time made all the difference.