R&D tax credits can be claimed by manufacturing companies who are looking to advance in their field through innovative research and development projects.
R&D Tax Credits for Manufacturing Companies
What is R&D in the manufacturing industry?
R&D in the manufacturing industry is undertaken to improve product quality while identifying ways in which companies can enhance operational efficiency.
Manufacturers across the UK can be rewarded by HMRC for innovating processes and implementing technological and practical advancements to improve productivity.
What can be claimed as R&D tax credits for manufacturing companies?
Multiple examples can be considered manufacturing R&D, including, but not limited to, the following:
- Developing and trialling new solutions
- Digitising manual processes
- Revising production procedures to meet new regulatory requirements
- Creating specialised tools and machinery to meet high-end specifications
- Integrating new technologies with existing operating systems
- Implementing environmentally friendly processes
How much of your project can be claimed as manufacturing R&D tax credits?
The R&D tax credits scheme has been introduced to reward businesses for innovation throughout the entirety of the project, including support and management costs.
It is not limited to design, development and prototype costs — companies can claim for planning, batch trials and any other activities which are considered necessary for resolving uncertainties.
Claiming prototype costs for manufacturing R&D tax credits
Whilst you can claim on prototype costs when applying for manufacturing R&D tax credits, it can be difficult to identify what HMRC will consider applicable. There are exclusions to be aware of, including material cost which can be recovered through the ordinary course of business.
If you would like to discuss your project further, we have a skilled team of advisers who will be able to highlight your prototype costs and communicate them to HMRC.
What can be claimed as R&D tax credits for manufacturing companies?
Multiple examples can be considered manufacturing R&D, including, but not limited to, the following:
-
- Developing and trialling new solutions
- Digitising manual processes
- Revising production procedures to meet new regulatory requirements
- Creating specialised tools and machinery to meet high-end specifications
- Integrating new technologies with existing operating systems
- Implementing environmentally friendly processes
How to claim R&D tax credits as a manufacturing business
- Make sure you have clear records breaking down the specific costs incurred in your R&D projects, including payroll for any permanent staff involved in the R&D work and subcontractor invoices.
- Ensure you also have precise information such as dates of the initial trial-and-error, when the first uncertainty happened, what that comprised and who was involved.
- Use our R&D tax credit calculator for an indicative idea of how much tax relief your company could be entitled to.
Manufacturing companies we’ve helped with R&D tax credits
Throughout our history, we have helped an array of manufacturing and engineering companies apply for R&D tax credits and be rewarded for their innovation, such as the following:
To see more examples of our R&D success in the manufacturing sector, please see our Case Studies.
Expert support claiming manufacturing R&D tax credits
The intricacies of R&D tax credit claims are best managed by an expert who can support your company.
randd uk recoups an average of £50K per claim for our clients, with vast experience in the manufacturing industry.
Speak to an expert today – one of our experienced R&D tax specialists will ensure your claim is best placed to earn the full possible entitlement.
Manufacturing R&D tax credit FAQs
· Creating or developing new products or processes
· Adapting to changes in legislation or industry requirements, including energy efficiency and reducing carbon emissions
· Developing a new and innovative approach to manufacturing, engineering and foundries systems
· Bespoke solutions
· Manufacturing prototypes, pilot runs and testing
· Developing or creating new composite materials
· Trialling and developing systems to perhaps improve performance, cost-efficiency or methodology
Many manufacturing companies subcontract a portion of their development work – for example the production of a specific component or software – to third parties. Up to 65% of the cost of using a subcontractor is eligible for tax relief.
Research and development in the manufacturing industry can be particularly expensive as companies invest large sums of money to make their products more environmentally friendly.
Therefore, proceeding with an R&D tax credits claim can recoup a proportion of that sizeable outlay, enabling funds to be reinvested into the company’s operations.
One R&D tax credits claim is allowed to be made each year by a company and there is no limit to the amount of tax relief that can be received.
This depends on a variety of factors, namely the dates of the accounting period being claimed for, the size of the company, its financial performance and the scale of its expenditure on research and development. See our detailed explanation of R&D tax credits for more information.
At the end of the accounting period in which an R&D project has taken place, a company has two years in which to submit its tax credits claim. For instance, if the end date of your accounting period each year is March 31, you would need to submit your R&D tax credit claim for the accounting period April 1 2023 to March 31 2024 before midnight on March 31 2026.
If you team up with randd, the process is likely to evolve over a period of around 12 weeks, starting with a pre-qualifying call to determine whether your R&D activity qualifies. Once the claim has been qualified and we have obtained all your R&D costings, we can calculate the value of your claim and submit it to HMRC. You will typically hear back from HMRC within eight to 12 weeks.
R&D Capital Allowances enable companies to claim 100% tax deductions for capital expenditure incurred on development, equipment or facilities used to carry out R&D activities.
By utilising both schemes correctly, you can lower your taxable profits by writing off your fixed assets in the year they were purchased – thereby increasing the surrenderable taxable loss for a cash tax credit.
It may also be possible to win an Innovation UK grant by submitting an innovative breakthrough or game-changing idea through a competitive application process.