Manufacturing Industry R&D Tax Credits
Manufacturing Industry R&D Tax Credits
By its nature, the manufacturing and engineering industry is constantly making advances. The need to solve new issues and find new solutions means this sector is often innovating and creating efficiencies.
It is an area that benefits greatly from the UK Government’s R&D Tax Credit scheme. Currently, over 70% of the spend from this scheme goes to businesses within the manufacturing and engineering industry. However many small businesses may still be missing out on a valuable source of income.
Could You Be Missing Out?
The scheme could mean a significant boost to the income for many SMEs, but many companies are still not claiming as potentially eligible activities are considered routine. Some examples of potentially eligible projects are:
- New products and designs
- New materials and required adaptations
- Enhancing speed and efficiencies
- Scaling up existing processes
- Integrating new and old systems
- Developing new software
The manufacturing industry can benefit greatly from this scheme, as you’ll be able to claim for the costs of materials and utilities used within your eligible activities as well as other costs. It is potentially a key source of income for many businesses, and can reward the hard work and innovation undertaken across the industry.
With this in mind, it’s vital to get your claim right. With an experienced team, Cutts & Co relish helping companies get the most out of their vital work, and we are ready to help any company understand the R&D Tax Credit process and make a successful claim.
Cutts & Co Make Claiming Easy
Our expert team makes claiming R&D credits easy for our clients in the food and beverage sector. We work to provide clear, simple and effective advice throughout the process.
If you want to maximise your claim, or are looking to better understand the scheme, you can be sure of the best advice with Cutts & Co.
R&D Tax Credits Explained - What are R&D tax credits?
Put simply, R&D tax credits are an incentive paid out to businesses for qualifying R&D projects and often act as a key source of income for many businesses.
The reward for businesses can be accessed either as a tax bill reduction or for loss making companies, a cash payout. It consists of two schemes – one for smaller businesses, SME R&D Relief, and one for larger businesses, RDEC.
HMRC applies stringent rules for eligibility and what costs can be covered, although many businesses could be missing out on credits.
Which businesses are eligible for R&D credits?
R&D tax credits are open to any business, regardless of the sector you work in or if you do not typically undertake R&D projects. The business must be a limited company, have undertaken qualifying R&D projects and have spent money on those projects.
For businesses applying for SME Relief:
- A SME with fewer than 500 staff
- And either less than €100m total turnover or less than €86m gross
Other businesses who fall outside of these guidelines might claim for Research & Development Expenditure Credits (RDEC). These credits have replaced the large company scheme, and may be claimed by SMEs who have completed work whilst contracted to a larger company.
What costs can be covered by R&D tax credits?
The range of costs you’ll be able to claim against are also fairly broad, and include*:
- Staff costs, including salaries, NI contributions and pension contributions
- Subcontractor and freelancer costs
- Costs of software related to your project
- Costs of materials and utilities used in the R&D process
- Clinical trial payments in the pharmaceutical industry
*All qualifying costs subject to HMRC standards
How much could my claim be worth?
For SMEs applying for SME Relief:
- An extra 86% deduction of qualifying costs
- If loss making, 10% of the surrenderable loss as a tax credit
For businesses applying for RDEC:
- 20% of you R&D costs as a tax deduction
