Manufacturing – Bahk Consultancy

R&D Tax Credits in Manufacturing

The UK manufacturing sector heavily revolves around innovation. Plenty of businesses fail to claim the tax credits for their process usually because they are considered routine by the business instead of innovative. With an annual output of £192bn, the UK manufacturing industry remains the ninth-largest in the world. This scheme is available to pharmaceutical and technological companies working on their vaccines and artificial intelligence and all sectors, including this one.

What Qualifies For R&D In Manufacturing?

The definition for which projects can qualify for R&D is incredibly broad, for a deeper understanding check out our definition here. In the Manufacturing sector examples of R&D could include the design and development of prototypes that have multi-purposeful features or even designing/manufacturing bespoke tools and equipment for product manufacturing. Ultimately your project needs to recognise and identify a scientific or technological uncertainty.

Robotics

Creating, developing or improving functional prototypes, source code or robotics

Prototypes

Creating, devloping, or improving prototypes, source code or programming robotics

Integrating New Materials

Using new materials to improve product performance and manufacturing processes.

Using Automation

Can be used for different purposes, such as streamlining manufacturing processes.

The rules of R&D are not exclusive to the above list. They are put into place to reward and refund those who are dealing with uncertainty.

Failed Innovations Still

Qualify For Refunds!

The result of your R&D doesn’t have to be a success! Your business can still be eligible for a refund even if the project was unsuccessful!

Examples of R&D Projects in Manufacturing

There are five categories within Manufacturing R&D claims that can be claimed back for; subcontractors, staff costs, externally provided works (EPWs), consumables and finally, heat, light and power.

Below, we have detailed how you could include these in your claim.

Scaling up Production

Whether it is only the equipment or process itself, the end goal of the intention is to increase overall production capacity.

Creating New Methods

Introducing methods to reduce environmental damage using sustainable processes/materials.

Creating Bespoke Tools

Designing or manufacturing bespoke tools for product manufacturing. This could include tools such as: jigs, moulds or dies.

Computer-Aided Design

Design and development of prototypes with new functionality using CAD software tools.

Waste Reduction

Waste reduction through machinery/process innovation such as streamlining manufacturing and Just-in-time production.

Meeting Regulations

The manufacturing sector has constantly-changing regulations related to environmental sustainability. Undergoing research and making advancements to meet new regulatory requirements

What Costs Can I Claim Back?

There are five categories within Agricultural R&D claims that can be claimed back for; subcontractors, staff costs, externally provided works (EPWs), consumables and finally, heat, light and power.

Below, we have detailed how you could include these in your claim.

How can I use Subcontractors in my claim?

If you rely on a third party to help with part of the R&D process – this isn’t an issue! You can still use These claims are qualifying expenses for the R&D tax relief scheme.

Can I claim back R&D Tax Credits for staff costs?

A large majority of R&D Tax Relief claims involve staff costs, these costs can be encountered for staff who are involved in the R&D project either directly or in-directly.

A direct staff cost that is claimable is the expertise or advice from a competent professional, this is usually someone in a senior position in the industry that has had a direct involvement or effort in the R&D project, or a member of staff that has a defined and technical role that is actively involved in the project.
An indirect staff cost is still valuable in the process of your claim, it covers the ground of members of staff that help to enable R&D by being part of the management process or help to support the R&D taking place.

How do Externally Provided Workers affect your claim?

Externally provided workers (EPWs) are temporary workers on your R&D project, they are often sourced from an external agency who is responsible for their contract. The expenses spent on EPWs are still eligible for part of your claim, in fact you can claim up to 65% of tax credit relief on them no matter how big or small your company is.

What are Consumable Items and how do I use them in my R&D project?

A consumable item is any item that is used or transformed whilst in the process of undergoing R&D activity. It includes items such as raw materials, software licenses or even stock used in your project.
The idea is that these items no longer have any use after the project as they are so consumed by the activity undertaken and can be counted as qualifying expenditure.

What utility costs can I claim from my R&D activity?

The utilities that you use during your R&D activity, such as heat, light, power and water are all eligible to claim back with your tax relief claim. You just need to work out the proportion of each of them that was used during the activity.
This can be difficult to work out, however that is where we are here to help you with at Direct R&D using the knowledge and experience of our expertise advisors.