Making The Most Of R&D Tax Relief For Manufacturing Businesses

Posted by Andrea Wilson on Oct 10, 2022 10:43:05 AM


Research and Development (R&D) tax relief can transform the way your manufacturing business operates, by providing financial incentives for investing in innovation. For businesses keen to enhance their research and development to achieve growth, R&D tax credits are an invaluable way to inject cash into the organisation and address some of the challenges facing manufacturers today.

In this article, we discuss how R&D tax relief works, who is eligible, and how you can make the most of the scheme.


How Does R&D Tax Relief Work?

Developing new products or processes and improving current ones is fundamental to success in manufacturing. Businesses who doggedly stick with so-called tried-and-trusted techniques often find that they are overtaken by their competitors who can produce superior quality goods for a lower price and in a quicker time.

By investing in process improvements and innovation, eligible businesses can submit an R&D tax credit claim for a reduction in corporation tax or a cash payment. While R&D tax credits are available for a wide range of sectors, they are especially well-suited to the manufacturing industry because it invests heavily in innovation – particularly within SMEs. R&D tax relief is available for the last two accounting periods if you are claiming it for the first time.

Who Is Eligible For R&D Tax Relief?

To qualify for Research and Development tax credits, manufacturing businesses must:

  • Be registered as a UK limited company that pays Corporation Tax (CT).
  • Have conducted qualifying research and development and 
  • Have invested money in R&D projects.

Documented the costs and time associated with the R&D activities.

What Can You Apply For – In Plain English!

The process needs to be that you: -

  • Looked for an advance in science and technology – including an improvement to, or expansion of, existing technology.
  • Had to overcome uncertainty.
  • How you tried to overcome this uncertainty.
  • Could not be easily worked out by a professional in the field i.e., is not already proven/known. 

And the projects do NOT have to be successful to include them!

How Can You Make The Most Of Your R&D Tax Relief?

While any cash payment or reduction in CT will benefit your business, R&D tax relief is most effectively used to combat some of the specific challenges facing the manufacturing industry. This includes, but is not limited to, investing in innovations that:

  • Manage supply chain disruptions to reduce lead times and ensure that customers’ orders can be fulfilled quickly.
  • Address labour shortages, thereby boosting productivity and securing your business’s place in its sector.
  • Achieve greater operational efficiency to improve product margins and cut costs.
  • Invest in green technology, to reduce demand on fossil fuels, reduce energy expenditure, and improve your reputation as a credible eco-friendly business.

Speak To Us

If you’d like to find out more or join the conversation about R&D in the UK manufacturing sector, feel free to connect with me on LinkedIn,  Andrea Wilson or send us a message through our website!

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Topics: manufacturing, UK Manufacturing, #ukmanufacturing

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