Engineering – Bahk Consultancy

R&D Tax Credits in Engineering

Research and Development tax relief is fundamental in the Engineering sector not just for the financial benefit it brings but also creates a more stimulating environment for everyone involved. If you are looking to resolve uncertainties, through creating a unique process that includes a lot of research, chances are you could be eligible for R&D tax relief.

If you tackle future and current projects from an R&D perspective by incorporating it into your decision-making then it will allow you to take more venturesome risks that could improve the industry as a whole.

What Qualifies For R&D In Engineering?

In the Engineering sector, R&D mostly happens along each stage from the designing, building and analysis. Ultimately if your business recognizes and identifies a scientifically or technological uncertainty, develops a way to test this and attempts to overcome this uncertainty, then you have a high chance of being eligible to claim R&D tax relief again. The projects can involve anything from developing powerplants to electrical devices with an electronic circuit.

The definition for which projects can qualify for R&D is incredibly broad, for a deeper understanding check out our definition here.

Employment & Contractor or Subcontractor Costs

SME’s can claim up to 65% of the costs paid to a subcontractor and for an RDEC

Cost of Materials & Consumables

The cost of materials that are consumed or transformed within the R&D process

Specialist Skillset & Software Costs

Requiring a specialist for your R&D efforts and the amount spent on Computer Software

Development & Testing Costs

An advance in science, technology and product/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 Engineering

There are many different examples of qualifying projects such as ones that involve CAD, electrical renovation, the development of new electrical systems or modifications to existing ones, for areas such as telecommunications, power, robotic product development, security or control. As long as the projects are aiming to overcome a scientific or technological advance then they will be eligible for R&D Tax Credits. The advance that the project is seeking must not be knowledge or publicly available and you must be unsure of the outcome.

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

Innovative Control Systems

Applying innovative control theory and design to Electrical Engineering systems and equipment can greatly improve function making it a qualifying project.

Energy Efficiency

Utilising a sustainable design philosophy into Electrical Engineering projects to work towards an eco-friendlier industry and to protect the global environment will most likely qualify for R&D Tax Credits.

Practice and Methods Safety

Identifying risks in safety and overcoming these obstacles can be done through designing new working processes and techniques, which will improve the quality of life across the sector, but also within society.

Research for New Materials

Researching new materials to be used within revolutionary devices, equipment, machinery and processes is vital for discovering new scientific solutions in the current environment. It is also the core of subversive technology revolution.

Creating and Designing a unique innovative process

Designing unique innovative processes and cutting-edge solutions to societal problems frequently takes place in the Engineering sector, meaning that the sector is one of the top qualifiers for the R&D Scheme.

Solving An Uncertainty

Engineering firms are often pushing their boundaries when it comes to their technical knowledge, designing and prototyping various solutions to an uncertainty, ensuring that the right outcome is achieved.

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.