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R&D Tax Credit Manufacturing

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When it comes to R&D tax credit, manufacturing sector companies often forget that they can usually qualify for a substantial tax relief claim. If you are looking to claim your own R&D tax credit manufacturing industry relief, then having an expert on hand can make a significant difference.

The manufacturing sector is open to the same R&D tax credit options as many other industries – but many companies never notice. We at Taxbite can provide the skills needed to help you take advantage of each government incentive or tax credit scheme available to you.

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R&D Tax Credit Manufacturing

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Why Taxbite?

We have worked with hundreds of UK companies within the manufacturing industry, providing easy access to each tax credit scheme that they qualify for. Our experience with the R&D tax credits scheme has allowed us to assist manufacturing companies in getting the results they want.

Not only can we act as tax specialists, but we can also help you with the finer details: helping you with the claim process, matching changing regulations and checking to see if your engineering projects qualify for a tax rebate.

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Do your manufacturing projects qualify for the R&D Tax Credits scheme?

The R&D tax credits scheme was designed to support any manufacturing or engineering industry businesses that devote time and money to new technologies.

As a valuable incentive to innovate, the R&D tax relief claim offers benefits to manufacturing companies that attempt something new and risky. To qualify for the R&D tax credit claim scheme, you need to be carrying out R&D projects that show true innovation.

This does not mean the improvement of old systems but actual innovation: braving technological uncertainty to produce new materials, doing feasibility studies into groundbreaking existing production process alternatives, and anything else that will move the industry forward.

R&D Tax Credits for manufacturing explained

These R&D tax credits are given out either as a cash repayment or reductions on corporation tax, providing the manufacturing business with key tax benefits. Qualifying for this tax relief scheme means targeting innovation that other companies will not and stepping outside of your business’ comfort zone.

These tax benefits are meant to support the development of new technology, the design of a new process, or other work that can impact the manufacturing industry as a whole. This means that the amount of R&D tax credits you receive scales based on how much you invest in a project that may not succeed.

Is your manufacturing project eligible for an R&D claim?

How do the government find a business eligible for R&D tax credits? With one simple factor – whether or not the work is innovative.

Manufacturing businesses qualify for R&D tax credits if they chase innovation. For example, achieving ambitious Net Zero targets by designing an alternative to plastic products is innovation, whereas streamlining manufacturing processes without changing the process itself may not be.

The work needs to be something that would impact manufacturing and engineering clients and companies all across the industry. Overhauling legacy back-end systems is not as impressive as designing entirely new production processes that significantly boost profit margins and save critical time on the production of lifesaving equipment.

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Reasons to claim R&D tax credits for the manufacturing sector

There are many situations where claiming R&D tax credits is useful, but there are certain cases where tax relief claims really shine. These include:

Sustainable growth

Having more money coming in (or getting reductions in corporation tax) can allow manufacturing companies to sustain themselves during periods of low productivity – either from the ongoing disruption caused by a changing political landscape or the fact that they have devoted a lot of employees to R&D work.

Innovative culture

If your business can claim R&D tax credits, then you can use that R&D tax relief to pursue even more innovative projects. Innovation can be scary for even the most stable manufacturing company, so having that R&D tax relief means that you can begin to build a culture of pushing for more innovative work instead of staying stagnant.

Competitive edge

There is no denying that innovative work leads to a strong competitive edge. Whether it is new forms of product storage, improved chemical products, ways to deal with skills shortages or overhauled production processes, an innovative change is often a valuable one.

Quicker time-to-market

R&D tax relief and payments can let your business employ more staff or agency workers – and in engineering sectors, every employee counts. You can also pull more people away from profit-generating tasks, allowing for faster R&D without lagging behind your competitors.

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How to calculate your manufacturing claim & what to include

Your total R&D tax credits can come from a complex calculation, but there are only so many major factors that influence it. Understanding them can help you balance your expectations and understand where the money is meant to be sent.

Staff Costs

A large part of R&D tax credits can be to cover employee or staff costs, including outsourced work. R&D requires a lot of specialists, and you can’t always pull people off the manufacturing processes, meaning that R&D tax relief claims can be calculated based on the staff you are paying (or need to hire).

Software costs

Software can be a costly part of R&D work. R&D tax credits can make it much easier to buy the software that you need for research, development, prototyping and manufacturing.

Time spent on the project

The more time you spend on a project, the more it costs overall. This means that everything from development time to manufacturing delays can influence how much your business needs to pay for the project – something that your business can use to influence the R&D tax credits you receive.

Expenditures funding the project

If your projects are costing you a lot in funding, either during the development stage or as part of prototyping and manufacturing, then these expenses can be important. The total costs of the projects (and the processes involved in creating said projects).

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Misconceptions around manufacturing R&D tax credit claims

Many companies, from smaller businesses to large multinationals, can misunderstand the point of the R&D tax credit claim process if they are not prepared for it. We at Taxbite offer our experience in helping you get the tax relief you need, even if you are not sure how to pursue it yourself.

Only new manufacturing qualifies

As long as your project is in active R&D, the government may find your business eligible for R&D tax relief. UK businesses just need to be working towards a better agenda, project or processes, as well as meet the requirement that the project is innovative.

Part of the project wasn’t R&D

Not all of the project needs to be R&D for the tax benefits to apply… The entire SME scheme works this way – as long as you are meeting the requirements, your project can benefit from it.

We weren’t taking a financial risk

Innovative projects do not always require financial risk. Tax benefits can help if this is the case, but you can still get the benefits with perfectly affordable processes as long as you are doing something that will benefit your business sector (or sub-sectors) in the long term.

We used subcontractors, and they don’t qualify

Subcontractors do not need to qualify; only you do. However, you may earn less for using subcontractors compared to your own employees – a part of how the benefits interact with the overall corporation tax bill.

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Capitalising software expenditure does not have an impact on my R&D tax credit claims

Almost anything you do with software, hardware, R&D or testing will impact your credit claims in some way. All credit claims are calculated fairly based on what the company seems to need.

How can we help with your manufacturing R&D Tax Credit claim?

We at Taxbite understand tax extremely well, with some of our specialists having worked in the tax field for their entire working life. We can use our expertise to help you get the exact tax benefits you need, helping you work out how your business can qualify for R&D tax credit.

Frequently Asked RD Tax Questions

Does your manufacturing business qualify?

We can help you figure out if you qualify – whether you are making machines, medical equipment, tobacco products, textiles, or consumable items for the food and drink sector. All that matters is your intentions and the project you are currently carrying out.

Who qualifies for manufacturing development R&D tax relief?

If you are innovating, you qualify. This is judged on a number of factors, something our Taxbite experts can help you with.

What costs that you can include in your RD tax credits claim?

Claimable costs can cover anything from employee wages to software costs. This differs from project to project and company to company, of course.

Can you Claim R&D Tax for subcontracted development in the manufacturing industry?

You can claim R&D tax credits for subcontracted work, although you will get less than in-house work.

What can’t you claim for in software R&D?

If your project does not advance anything and is purely routine, or if you are just re-creating and altering something that already exists, you are unlikely to qualify.

How much are software R&D tax credits worth?

The worth of your tax credits depends on why you qualify and how you can use them. This means that there is not a specific value on them as a whole.

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We at Taxbite are prepared to help you with every step of claiming your tax credits. No matter your sector, we can ensure that you get the credits you need as easily as possible.

If you want to know more, contact our specialists directly to get a breakdown of what we can do and how it can help. Get in touch and see what we can do for your business.

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