26TH NOVEMBER, 2018

What Projects Could Be Eligible For R&D Tax Relief in Manufacturing?

The British government supported UK manufacturing businesses with almost £1bn of R&D tax relief funding in 2016/17 alone. This has been further boosted by the increase of Innovate UK grants which have provided more than £2.2bn to 8,000 organisations since launching in 2007, yet many manufacturing projects are still missing out.

The good news is that these impressive figures are due to increase further with the Industrial Strategy Fund set to provide additional R&D funding as part of a £4.7bn government innovation drive.

This additional funding has arrived at the perfect time as the global manufacturing industry sits on the cusp of dramatic advances in artificial intelligence, robotics and automation.

The Cost Of R&D

According to the ONS, the UK spent a total of £33.1bn on R&D projects in 2016 with £15.64bn of this coming directly from the manufacturing sector.

The final R&D bottom line cost is ultimately made up of a myriad of smaller parts, including:

  • Defining technical objectives
  • Feasibility studies
  • Reviewing competing technologies
  • Analysis, design and development
  • Producing technical specifications
  • Product testing
  • Project planning & management

Cash Support For R&D in Manufacturing

With Brexit looming on the horizon, the onus is very much on supporting R&D manufacturing in order to help British businesses maintain their authority and relevance on the international stage. The government currently provides R&D cash support through Innovate UK and the HMRC R&D Tax Credits incentive.

Innovate UK runs a number of competition-style investment opportunities for UK manufacturing businesses, offering funding which has already been accessed by 11,000 projects and produced 70,000 jobs. Visit here to read more on Innovate UK.

HMRC R&D Tax Credits

More than a quarter of the 39,700 R&D Tax relief claims from 2016/17 came from the manufacturing industry averaging at £61,514 for SMEs and £348,916 for larger companies. However, there are still thousands of businesses that have missed out on these incentives because they simply didn't realise they were eligible.

So for those in the manufacturing industry, this brings us to the big question.

What Qualifies As Research & Development In Manufacturing?

According to government guidelines, projects that count as R&D must show that they:

  • Have looked for an advance in science & technology
  • Had to overcome uncertainty
  • Attempted to overcome this uncertainty
  • Couldn't be easily worked out by a professional in the field

The issue for most manufacturing businesses is that these definitions can be subject to interpretation so it's a little easier to show some of the more common projects which are considered R&D manufacturing.

Products

  • Product development using computer-aided design tools
  • Development of second generation or improved products
  • Prototyping and three-dimensional solid modelling
  • Integration of new materials to improve product performance
  • Testing product prototypes
  • Increase ease of operation or suitability of manufactured products

Processes

  • Designing and developing cost-effective and innovative operational processes
  • Integrating new materials to improve manufacturing processes
  • Designing and evaluating process alternatives
  • Developing processes that would meet increasing regulatory requirements
  • Streamlining manufacturing processes through automation

Computing

  • Developing unique computer numerical control programmes
  • Designing innovative logic controllers
  • Development of computer models
  • Virtual, 3D and mixed reality modelling

You can find a detailed breakdown of examples of research & development in manufacturing by taking a look at the following page.

There's a common misconception that R&D is almost exclusively reserved for those in lab coats or the software industry, but the reality couldn't be further from the truth. The manufacturing industry makes a significant contribution to the UK's technological growth and the rewards are there to be claimed simply by engaging in the government's R&D manufacturing tax credits scheme.

With almost 11,000 UK manufacturers claiming R&D manufacturing tax relief in 2016/17 and with the government continuing to rally round the industry, it's a great time to find out if you're undertaking activities that are eligible for a successful claim. Click here to contact us for a free eligibility call

Barrie Dowsett, ACMA, GCMA
Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud
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Myriad Associates helps businesses maximise tax reliefs and secure R&D grant funds. We specialise in R&D Tax Credits, Video Games Tax Relief, Innovate UK grants, Horizons 2020 grants, and Research and Development Capital Allowance Claims.

  • Submitting R&D tax claims since 2001
  • 100% success rate
  • Over £100m claimed and counting
  • Industry leading specialists
  • In-house technical, costing and tax experts
  • Member of the Research and Development Consultative (RDCC) committee

Meet some of the team behind Tax Cloud

Barrie Dowsett ACMA CGMA Chief Executive Officer
David Farbey MA, FISTC, FRSA Senior Technical Consultant
Deborah Chapple ATT Corporate Tax Senior Associate
Lauren Olson MA, MISTC Technical Consultant