Manufacturing and Engineering

The government’s definition of a qualifying R&D project is broad. Some examples of eligible manufacturing and engineering projects include:

• Developing innovative designs for bridges and roadway structures
• Improving or developing new construction equipment
• Building new, improved or bespoke heating and air conditioning systems
• Innovative product development using computer-aided design tools
• Development of second-generation or improved products
• Tooling and equipment fixture design and development
• Developing unique computer numerical control programs
• Designing innovative programmable logic controllers
• Designing innovative manufacturing equipment
• Prototyping and three-dimensional solid modelling
• Development of computer models
• Designing and developing cost-effective and innovative operational processes
• Integrating new materials to improve product performance and manufacturing processes
• Evaluating and determining the most efficient flow of material
• Designing and evaluating process alternatives
• Designing, constructing, and testing product prototypes
• Increasing ease of operation or suitability of manufactured products
• Developing processes that would meet increasing regulatory requirements
• Streamlining manufacturing processes through automation
• Digitising manual machining processes
• Developing new forms of environmentally friendly packaging
• Developing specialised tools to meet high-specification product designs
• Changing an existing production process to comply with changing regulations
• Integrating new technologies with legacy back-end systems

Tasks and activities, such as the below, would be considered eligible for R&D tax credits: 

• Defining technical objectives
• Identifying uncertainties
• Feasibility studies
• Reviewing new and competing technologies
• Analysing, designing and developing the technology
• Producing technical specifications or other documents to explain and support the R&D project and advancement
• Testing the product, process or software
• Planning and managing projects
• Support activities that directly relate to the R&D project such as administration, finance, training and personnel services

You can submit an R&D tax relief claim at any time up to the first anniversary of the filing due date of the company tax return for the accounting period in which the claim is made (paragraph 83E(1) of Schedule 19 to the Finance Act 1998). This means that a business can claim for R&D tax relief going back 2 accounting years. The claim can be made in a company tax return or as an amendment to it.

HMRC works to process applications for R&D Tax Credits within 28 days. However, the processing time required for HMRC to review and consider an R&D Tax Credit claim depends largely on the nature of the claim itself in addition to the complexity of a company’s structure and its accounting. Even the time of year can make a difference, with peak accounting times such as March and December being particularly busy and resulting in slower processing times.

HMRC will follow the guidance supplied in their Statement of Practice SP 05/01 to deal with late claims. The success of these appeals will depend on the claim itself. HMRC will rarely allow a late claim if the claimant simply didn’t have enough time or because they weren’t aware of the R&D tax relief scheme.

An R&D team could consist of many individuals from different parts of the business. It may include people such as:

• An R&D Manager
• Engineers
• Project Co-ordinators
• CAD Engineers
• Quality Control
• Testing specialists
• Cost Accountants
• Senior Management

Manufacturing & engineering R&D tax credits is a government-funded incentive designed to encourage manufacturers and engineers to embark on R&D projects that result in the design, build and development of new, innovative products, processes and services or the enhancement of existing ones. If the R&D project either resolves a scientific or technological uncertainty, manufacturers and engineers could claim a tax rebate or cash repayment for up to 33% of the costs associated with their R&D work.

To qualify for R&D tax credits, your R&D project must either attempt to resolve a scientific or technological uncertainty or seek to uncover knowledge that doesn’t already exist in the manufacturing or engineering industry. Your project doesn’t even need to be successful to qualify for R&D tax credits.

The average R&D claim that manufacturers and engineers receive is £129,000. This covers costs like:

• Employee wages, NI, pension contributions and expenses
• Sub-contractors, freelancers or agency workers
• Subcontracted development or testing
• Consumables like light, heat, power and materials relating to the project
• Software costs eg. CAD and 3D modelling software