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How can engineering companies benefit from R&D tax credits?

R&D credits have been around for 20 years and offer vital financial support across the engineering sector, as well as many other UK industries. The incentive is designed to encourage innovation and increase spending on research and development (R&D) activities.

Companies involved in all aspects of engineering are continually making investments into R&D to fill gaps in technology and solve a variety of complex problems.

The R&D tax credit government scheme allows engineering companies to claim back 33p for every £1 spent on R&D activities.

However, roughly only 37% of UK engineering firms are claiming. Others are missing out, even when they are eligible.

Why is this happening? Reasons vary, but the most common one appears to be that firms are unaware their projects qualify, and therefore believe the scheme isn’t applicable to them. Others might not know where to start with the process.

In reality, many companies are driving innovation and probably qualify without realising.  UK engineering is fast-paced and full of exciting innovation that often comes about because of a need to overcome a problem, or advance understanding. The work that goes into this often qualifies for R&D tax credits.

For any firm that incurs cost in developing products, processes, software or services, there is a strong chance they could benefit from this government scheme.

Examples of qualifying projects

The disciplines break down into many diverse sectors, from aerospace, biochemical, civil, software to telecoms engineering, just to name a few,

R&D is crucial across all engineering sectors and companies are continually investing in projects to solve technical problems and develop cutting-edge products and infrastructure.

Innovation doesn’t only concern new products and ideas, but can also involve new ways of doing things. This could be altering business models to better suit the needs of customers and staff, or adapting processes to improve the end product or service.

Qualifying activities for the government incentive could include:

- Developing new, or improving existing, products or processes
- Designing, prototyping and trialling
- Tooling and equipment fixture design and development
- Developing processes that would meet increasingly regulatory requirements
- Streamlining manufacturing processes through automation

A civil engineering firm could be advancing in innovative waste-water technology development, structural engineers could be designing new sustainable solutions or electrical engineers might be developing more efficient power systems.

Claiming engineering R&D tax credits

R&D claims have a positive impact on company growth, as the relief provides a potential investment back into the business for future development, innovative projects and recruiting skilled staff.

Even if your innovative attempts are unsuccessful, there could still be activities your company has undertaken that are eligible for receiving R&D tax credits. The key is that your company was overcoming scientific or technological uncertainties to advance in some area within the sector.

There’s a fair bit of work behind getting the claim right and room for error.  Making the wrong estimations and putting forward an incorrect claim could get your business in trouble with HMRC, which can be costly and stressful. On the other hand, you could miss out on areas you didn't know you were eligible for.

Another option is to get in touch with a team of R&D tax credit specialists. The Taxshop offers expert advice throughout the process and we’ll do all the hard work to get your claim submitted, with no up-front costs.

If you would like free initial advice regarding your R&D tax credits, speak to one of our team to get started on receiving a no-obligation review of your claim.