Published 27/02/2020
Modified 07/02/2023
5 min read

R&D Tax Credits for the Manufacturing Sector

Innovation Tax provide examples of the many activities which can result in significant amounts of R&D Tax Credits for the Manufacturing Sector.

R&D Tax Credits for the Manufacturing Sector

The Manufacturing industry accounts for 25% of all R&D Tax credit claims made

In the fast-moving world of smart technology, the ability to innovate and adapt to customer requirements is an essential weapon in the manufacturers’ armoury, hence flexibility has never been more important than it is today. To meet industry needs, many manufacturers find themselves investing in their research, development and test capabilities and, at Innovation Tax, we understand the importance of having a specialist team to help guide you along the way.

Many Small and Medium-sized Enterprises (SME’s) manufacture in small batches to meet specific customer requirements and, therefore, the ability to develop and provide bespoke solutions often places them at a significant market advantage. However, the increasingly competitive environment creates the need to align this with cost-effectiveness, requiring manufacturers to explore a multitude of ideas and concepts through a programme of trialling and testing in order that variations in product specification from any given customer can be catered for promptly, reproducibly and economically.

Research and Development within the manufacturing sector isn’t just about finding new ways to do things; it can extend to making appreciable improvements in process efficiency or raw material usage or simply in getting previously disparate systems to work in synergy with one another.

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

R&D Tax Credits can be particularly beneficial for SME’s in the manufacturing 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 Manufacturing activities qualify for R&D tax credits?

Examples of the type of projects which are likely to qualify for R&D Tax Credits within manufacturing include;

  • Design and development of new products
  • Appreciable improvement within existing processes
  • Increase cost effectiveness of manufacturing processes through automation
  • Evaluation of new materials to increase/improve performance within a product, process, system or device
  • Prototyping and 3D modelling activities
  • Testing and trialling activities carried out to test efficiency, accuracy, robustness, durability and weight
  • Designing new processes to allow for a more efficient flow of materials
  • Modification of machinery to adapt the intended use and add additional capabilities
  • Development of computer-controlled equipment
  • Improve sustainability of new and existing products and processes
  • Requirement to adhere to regulatory requirements requiring processes to be developed / altered
  • Design and development of innovative safety equipment
  • Activities to scale up production
The average annual R&D Tax Credit claim benefit received by companies in the manufacturing industry is currently £98,000

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

R&D is recognised as an important factor in economic growth and balance and can lead to highly valued technologies and strategies, which could derive potential value when considering sustaining a competitive advantage. Furthermore, qualified R&D projects allow manufacturers to claim tax relief on relevant costs with the help of the R&D Tax Credit legislation, resulting in either a reduced tax liability or, where a company may be loss-making for tax purposes, a payable tax credit.


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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