The latest statistics on R&D tax credit published by HMRC in October 2019, show that 23.6% of all claims made under the SME scheme were for companies operating in the Manufacturing sector, accounting for 20.7% of the total value of claims. The average claim value was £46,970.
Research and Development Tax Credits within the Manufacturing industry
The manufacturing sector makes up a large part of all R&D Tax Credits claims. With this being such a wide reaching industry, many will face the majority of their technological uncertainties during the design phase.
Eligibility for R&D tax credits centres around the two key areas of either:
Producing new or improved products.
Design and development of a product involving some degree of uncertainty for which the answers were not obvious.
Manufacturing comes in many shapes and sizes, however, often uses standard methods found within the industry. However, in some cases, there will be a need for developing new materials or techniques. It’s these activities that can potentially become claimable elements for R&D tax credit.
Examples of technological uncertainty in the manufacturing sector
Choice of materials
Before manufacturing a new product, it’s essential for to select to right material. This is because it affects the structure and functionality of the finished piece. Materials need to be relevant to the brief, for example, they might need to be fire retardant, waterproof, or non-conductive. This in turn can cause many uncertainties and as a result, the choice of materials may need to be reconsidered.
Modifying or creating bespoke components
We’ve all been there, at the start, a project may seem very simple and straightforward. However, we then discover that a substantial amount of work is needed. Even when customising “off the shelf” or existing components, a great deal of uncertainty can arise. This is because there can be uncertainty on how these various components will react together.
Strength testing
All materials used will have different properties, with fatigue often only presenting itself under certain conditions or usage. Therefore, it’s essential to conduct thorough testing to ensure that the material is suitable. If a manufacturer is required to rethink this choice, or provide additional structural support, this could be qualifying R&D.
Prototype evolution
When creating a new product, prototypes are often needed. This is because it’s only once one has been developed, that functionality can be ensured. At this point manufacturers may see that the product has a fault and will need further design.
Testimonials from our Manufacturing clients
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