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Tax Credits for R&D in Manufacturing and Engineering Industries

If your organisation is involved in the business of manufacturing or engineering and you have recently introduced any new or improvised products or process, then there will be a strong chance of you getting benefitted from R&D tax credit claim.

What is the R&D Tax Credits?

R and D Tax Credits are incentive that is designed for encouraging innovation and increase the spending on various R&D activities in the companies in the UK. 

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It is top incentive from the government meant for encouraging their investment in R&D and allows maximum 33.35% of company’s R&D spending to be recovered in the form of cash repayment.

What kind of projects related to manufacturing and engineering may qualify for such R&D tax credits?

Following type of projects in manufacturing and engineering can qualify for these R&D tax credits:

  • Any innovative product development by using CAD tools
  • Any development of 2nd generation or any improved products
  • Any tooling or equipment fixture design/development
  • Any development of unique CNC programs
  • Any designing innovative PLCs
  • Any designing of innovative manufacturing equipment
  • Any prototyping and 3-dimensional solid modelling
  • Any development of new computer models
  • Any designing and developing of cost-effective or innovative operational processes
  • Any integrating of new materials for improving product performance or manufacturing processes
  • Any evaluating and determining most efficient material flow 
  • Any designing and evaluating of process alternatives
  • Any constructing, designing and testing of product prototypes
  • By increasing the ease of operation/enhancing suitability of the manufactured products
  • By developing processes which will meet increasing regulatory needs
  • Streamlining manufacturing processes with the help of automation.

Which projects may be included for claiming R&D tax credit in the manufacturing and engineering?

The following activities will be considered for obtaining R&D tax credits:

  • For defining technical objectives
  • For identifying uncertainties
  • For feasibility studies
  • For reviewing new technologies
  • For analysing, developing and designing the technology
  • For producing any technical specification or documents to explain or support any R&D project
  • For testing process, product or software;
  • For Managing and planning projects.

Besides above, few indirect support activities can also qualify for such R&D tax relief, like:

  • Administration, finance, or personnel services specifically needed to support any R&D activities;
  • Training for supporting R&D activities

What R&D expenditure may be claimed for any projects for the manufacturing and engineering?

It is possible to claim relief on various costs which have been spent through Profit and Loss account or in certain conditions you may also claim for capitalised expenditure. The main cost areas that may be claimed are:

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  • Staff costs like gross pay, employer’s pension contributions, reimbursed expenses concerning R&D activity
  • Agency workers 
  • Freelancers or subcontractors
  • Software license costs
  • Consumable items like heat, light or power, materials and equipment that are used or changed by R&D process.

Which staff roles are included in R&D tax claim in projects related to manufacturing and engineering?

Most commonly for any R&D team there will be many individuals who are from different areas of your business. Your R&D team may consist of R&D Manager, Lead Developer, Project Co-ordinators, Engineers, specialists for QC and Testing and Cost Accountants, and also members of senior management team.

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