The manufacturing industry is rich in innovative research and development (R&D) projects.
If your manufacturing clients have carried out qualifying R&D work, they could recoup thousands of pounds in R&D tax credits for their business – but too many are still missing out.
Some business owners and their accountants do not realise that their work qualifies. Others believe the reward is not worth going through what they perceive to be a long, complex process.
This couldn’t be further from the truth.
Claiming R&D tax credits is a highly effective way of securing your client a cash injection.
R&D projects in the manufacturing sector
With opportunities to innovate new processes and utilise advanced technologies, there is a wide range of scope available for manufacturing companies to carry out qualifying R&D.
Examples of R&D-qualifying projects in the manufacturing sector include:
- Making improvements to existing products, such as trialling new composite materials to make something more durable.
- Innovating new processes that make a product or assembly more efficient, such as by reducing waste and streamlining processes.
- Creating specialised tools and machinery to meet high-end specifications
- Investing in bespoke software to create new products or improve existing ones.
- Revising production procedures to meet new regulatory requirements.
- Digitising manual processes.
- Implementing environmentally friendly processes.
- Adapting to changes in legislation or industry requirements, including energy efficiency and reducing carbon emissions.
- Developing a new and innovative approach to manufacturing systems.
- Manufacturing prototypes, pilot runs and testing.
- Trialling and developing systems to improve performance, cost-efficiency or methodology.
If your client innovates products that are functionally better than similar products available on the market, there is scope to make a successful claim.
Remember, your client’s project doesn’t even need to be successful in order to be eligible for R&D tax relief.
As long as the project seeks a scientific or technological advancement where uncertainty is involved, it could qualify.
randd uk’s R&D tax consultants can help you determine whether a project qualifies under the scheme.
What are the qualifying costs for R&D tax relief?
Examples of qualifying costs include:
- Staff working either directly on the project or directly to support the project – wages, National Insurance contributions, and pension fund contributions.
- Consumable materials.
- Data licences and software subscriptions.
- Cloud computing services.
- Using AI to advance products, processes and services.
- Collaborative work.
- Prototypes and testing.
Whilst you can claim on prototype costs when applying for manufacturing R&D tax credits, it can be difficult to establish what HMRC will consider applicable.
There are exclusions to be aware of, including material costs which can be recovered through the ordinary course of business.
Our specialist R&D tax consultants can help you identify qualifying costs.
How to help your manufacturing client claim R&D tax credits
Accountants looking to claim R&D tax relief for their manufacturing clients need to submit a detailed report outlining their R&D activities, the technological challenges faced, and how the project aimed to overcome them.
However, preparing claims can be difficult when you lack the time, resources, or specialist knowledge of R&D tax relief.
randd uk’s expert R&D tax consultants help accountants with all aspects of the claims process, from preparing a robust application to resolving any challenges from HMRC.
Working with an expert in R&D tax claims ensures you have everything you need to secure thousands of pounds in tax credits for your client.
