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How do R&D Tax Credits impact the Engineering sector?
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.
As engineering activity impacts a vast range of established industries, HMRC report this as ‘Professional, Scientific and Technical’. Their latest round of statistics show that, for 2016-17, the sector successfully filed 10,115 claims (19.4% of the total) in delivering a combined relief to businesses of £990m (22.9%) and it’s encouraging to see that the interim figures for 2017-18 suggest a continuing upward trajectory, with more than 9,500 successful claims (20%) processed so far, generating a combined value of £1.02bn (24%).
What type of engineering activities qualify?
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
What types of expenditure can be included?
R&D Tax Relief can be predominately claimed on revenue expenditure in the following cost categories:
‘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