What is the difference between routine improvements and an advance in the manufacturing sector?

Given the technical complexity that is a core part of the manufacturing sector, it can be difficult to successfully draw the distinction in an R&D tax relief claim.

However, for a claim to be successful, it is imperative that only advances are included in an R&D tax relief claim, as routine improvements can cause the claim to be rejected.

As R&D tax consultants, we can help you to understand the difference so that you can make the most of R&D tax relief claims.

What counts as an advance in manufacturing?

For something to count as an advance, it has to be something that cannot be readily deduced by a competent professional and seeks to resolve a scientific or technological uncertainty.

This means that anything that is improved as part of regular work cannot be included.

Calibrations to existing machinery or systems to restore functionality that may degrade over time will not be included, as this should be a relatively simple task for those with professional experience.

However, developing entirely new processes or finding ways to get machinery and systems to achieve results that were not intended by the manufacturer can be considered an advance.

This might mean modifying equipment to match the capabilities of more expensive systems, but at a lower cost, or to conduct a thorough upgrade of systems to improve environmental sustainability.

Whatever the work that is undertaken may be, it is vital that there be some element of uncertainty and difficulty for it to be classed as true R&D.

Why do manufacturing projects struggle to be represented in R&D tax relief claims?

Engineers who work in the manufacturing sector may not fully appreciate the work that they do and can find it challenging to draw a distinction between routine work and an advance, which is further complicated by explaining it to HMRC.

As they often tackle a number of complex issues as part of the job, engineers should take the time to assess whether the work they are doing counts as an advance.

For this, they can consider whether they were able to draw on existing knowledge to find a solution and whether the solution discovered represents a step forward in scientific or technological understanding.

There must be an appreciable improvement to a system or process for a project to count as R&D.

When attempting to demonstrate this to HMRC, a compelling technical narrative will be vital, provided it exclusively focuses on work that is considered an advance.

Seeking support from an R&D tax consultant can help claims be accepted by HMRC, as the technical narrative will not be muddied by routine work that can call into question the validity of the overall project.

Even where routine work was done alongside more innovative tasks, it is important to exclude the routine from the R&D tax relief claim to ensure clarity for the agent reviewing it.

Our team can help innovative businesses and the accountants who support them to create valid R&D tax relief claims for qualifying projects.

Speak to our team to learn more about the difference between routine work and a genuine advance.

Adam Bointon