Published 14/04/2020
Modified 06/02/2023
5 min read

How do R&D Tax Credits impact the Engineering sector?

Innovation Tax explain how the R&D Tax Credit scheme can help UK companies in the Engineering sector maintain their global leadership position.

How do R&D Tax Credits impact the Engineering sector?

UK companies in the Engineering sector could benefit from significant funding through the R&D Tax Credit scheme

The UK engineering sector is awash with innovative activity, with companies constantly investing in ground-breaking methodologies to overcome a wide range of challenges to develop new concepts, as well as improving on products already in the marketplace. The UK is very much at the forefront in areas such as motorsport, aerospace and, in response to the current global situation, pharmaceutical engineering. Given the significant contribution the sector makes to the wider UK economy, the Government are keen to ensure that engineering companies are incentivised in their efforts to maintain our market-leading position; one of the ways they do this is via the R&D Tax Credit scheme.

How do R&D Tax Credits support the Engineering Sector?

R&D Tax Credits can be particularly beneficial for SME’s in the engineering sector, as they can help these companies to finance their R&D activities and compete with larger companies whilst improving competitiveness; leading to increased economic growth, job creation, and cash flow.

What types of Engineering activities qualify for R&D Tax Credits?

In the widest sense, engineering companies make ‘new products’ work (and ‘existing products’ work better) across a vast range of industries; specific examples of where R&D would be considered to have occurred might include;

  • Development of high-performance components for the aerospace and automotive sectors
  • Modification of existing machinery / processes to improve efficiency, cost effectiveness and to reduce wastage
  • Development, fabrication and scale-up development of new products in line with customer requirements
  • Trialling of new/alternate materials to appreciably improve product safety, durability, weight and size
  • Development of alternate, eco-friendly energy sources
  • Novel construction solutions to overcome environmental / planning restrictions
  • Migration of existing telecommunication services to digital platforms
  • Process automation to increase production capacity/efficiency
  • Deployment of robotics / artificial intelligence across an array of applications
How do R&D Tax Credits impact the Engineering sector, How do R&D Tax Credits impact the Engineering sector?, Innovation Tax
The average annual R&D Tax Credit claim benefit received by companies in the professional, scientific and engineering sector is currently £107,000

What types of expenditure can be included in a R&D Tax Credit claim?

R&D Tax Credits can be predominately claimed on revenue expenditure in the following cost categories:

  • Staffing Costs
  • Subcontractors
  • Externally Provided Workers (EPW’s)
  • Consumables
  • Software licenses
  • Utilities

Why work with Innovation Tax?

As R&D Tax Credit claim specialists, with a highly skilled team that includes technical experts who have worked in the engineering industry for many years, Innovation Tax is ideally placed to support companies in this sector in efficiently & accurately identifying the full extent of their scheme qualifying activities and eligible costs and submit a robust claim that will stand up to HMRC scrutiny; whilst also ensuring that they are fully benefiting from other Government innovation tax incentives such as the Patent Box, and maximising their Capital Allowances tax relief on commercial property assets.

Client Testimonial

As a company, we are involved in developing projects and products for handling refrigerants. We had previously considered claiming for Government-backed R&D Tax Credits, but we felt the claim process was onerous and our accountant did not have the expert knowledge. From our first meeting with Innovation Tax, they quickly understood the technical and financial aspects of our eligible R+D work and, with their industry expert carrying out the assessment and writing the reports to justify our claim, the entire process took only a couple of months from the initial meeting to receiving the repayment from HMRC. We would highly recommend using Innovation Tax Specialists’ service’. Roger Day, Managing Director of RDA Environmental Engineering Ltd


It can be challenging to submit an R&D tax credit claim to HMRC’s exacting standards. At Innovation Tax our team of experienced sector specialists, technical and quality assurance experts and tax professionals will help you identify the full extent of your qualifying activities and expenditure and work with you to ensure the correct information is included in the claim documentation, giving you peace of mind that your claim is robust, maximised and defensible.

Start the conversation with a complimentary, no-obligation discussion.

Innovation Tax specialise in helping companies access vital innovation tax incentives and grant funding to enable their businesses to grow, increase profitability, reduce risk and enable further investment in R&D, IP and capital assets.

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