R&D Tax Credits for the Manufacturing Sector
Manufacturers benefit from the highest average R&D claim value. Their R&D activity stretches from product development, production line speed and resource improvement, quality control and compliance. Each incremental challenge and solution sought can qualify as R&D.
What qualifies as R&D in the Manufacturing sector?
Taking, for example, the food and drink sector, we find qualifying R&D expenditure in activities like increasing shelf life, reducing (or increasing) sugar or alcohol content without impairing flavour or the development of new or improved bottling or canning processes. Lots of businesses are working to improve the health and nutritional profile of food and drink products, often to meet current legislation in non-routine ways.
More generally we see manufacturers developing new processes to scale up to make larger volumes, which may be based on small batch trials and may involve a pilot to investigate a concept or new process.
Manufacturers often trial and test materials, components, substances, chemicals, non-routine prototypes, methods or techniques. And of course there is innovation in streamlining manufacturing processes through automation.
Improvements to product packaging can also qualify as R&D if they represent a functional improvement, not just a design feature.
R&D can also come in the transfer of existing technology or adaptation of new technologies from other industries for novel applications to improve manufacturing processes or products.
This sector includes the following types of business.
- Manufacture of food products including dairy and bakery
- Manufacture of beverages – including brewing and distillery
- Manufacture of chemicals and chemical products
- Manufacture of electrical equipment
- Manufacture of motor vehicles
Yes, manufacturing companies can claim under either scheme depending on their size and other deciding factors. Of the R&D tax relief claims made in 2018-19 so far, 85% of them were under the SME scheme equating to 41% of the value claimed.