If your company is in the manufacturing or engineering industry then there is a strong chance that you could benefit from an R&D tax credit claim.
The latest HMRC statistics show manufacturing companies continue to top the industry sector table in making R&D tax credit claims.
What type of manufacturing and engineering projects can qualify for R&D tax credits?
Common examples of product and process development projects that may qualify for R&D tax relief include:
innovative product development using computer aided design tools
development of second generation or improved products
tooling and equipment fixture design and development
designing innovative manufacturing equipment
development of computer models
designing and developing cost-effective and innovative operational processes
integrating new materials to improve manufacturing processes
evaluating and determining the most efficient flow of material
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
What activities can be included in an R&D claim for manufacturing and engineering?
In terms of qualifying tasks, the following activities would be considered eligible for R&D tax credits:
defining technical objectives
reviewing new and competing technologies
analysing, designing and developing the technology
producing technical specifications to support the R&D project
testing the product, process or software
planning and managing projects.
In addition, certain indirect support activities may also qualify for R&D tax relief, such as administration, finance, and personnel services specifically required to support R&D activities and training to support R&D.
What R&D expenditure can be claimed for manufacturing and engineering projects?
You can claim relief on costs that have been expensed through the Profit & Loss account and in some circumstances you can also claim capitalised expenditure providing that the assets purchased have been classified as Intangible Assets. The main areas of costs that can be claimed are:
Staff Costs – Employee costs (salary, national insurance and employer pension) are apportioned for their time spent on the R&D project plus any reimbursed associated business expenses
Software – Purchased for R&D purposes and costs apportioned for any subsequent use
Subcontracted R&D – You can claim 65% of what you paid your R&D subcontractor
Utilities & Consumables – Water, fuel, power and material used in the project
Prototypes – Produced for R&D purposes.
What staff roles can be included in a claim for manufacturing and engineering projects?
It is not uncommon for an R&D team to consist of many individuals from different parts of the business. Your R&D project team may include the R&D Manager, a Lead Developer, Engineers, Project Co-ordinators, Quality Control and Testing specialists, and Cost Accountants, as well as
members of the senior management team.
The potential for R&D tax relief claims within the manufacturing and engineering sectors are huge. If you would like to discuss whether your company can benefit from an R&D tax claim, contact our specialist R&D team here at Cowgills.
Having a specialist on your side ensures your claim includes the full extent of your qualifying activities and costs and it is essential to act quickly as R&D tax claims can go back two year-end periods only, although if activity is being undertaken, you can claim each year.