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R&D tax credits for the manufacturing industry

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Can manufacturing companies be eligible for R&D tax credits

If you own a manufacturing business developing new tools, building innovative machinery or testing exciting new prototypes, you could be eligible to claim back thousands of pounds in Research and Development (R&D) tax credits.

What are R&D tax credits?

R&D tax credits are a government incentive designed to reward UK companies for investing in innovation. Last Autumn, the Chancellor announced changes to R&D tax credits to enable more UK companies to benefit, including manufacturing companies

Essentially, R&D tax credits allow up to 33.35% of a company’s R&D expenditure to be recovered, either as a reduction in Corporation Tax or as a cash repayment. This is a golden opportunity for many manufacturers to take advantage of in order to reinvest in innovation and development.

How to find out if you are eligible for R&D tax credits

To be eligible you need to demonstrate:

  • You have attempted to make an innovation either by improving an existing product or creating a new product
  • You have encountered adversity
  •  You can show how your advances benefit the general public or the manufacturing sector as a whole, not just your own business
  • The solution you are trying to reach could not be easily worked out by a professional in that field or if someone has worked on this particular project – how they failed and how you tried to overcome this
  • You have faced risk
  • The successes and failures you encountered

What costs can you claim for?

The manufacturing industry traditionally has huge overheads. You can claim on the following costs provided they are directly related to R&D projects you are undertaking:

Staffing costs Consumables Prototypes Computer software Sub-contractors
These can include wages, NI contributions and even pensions Raw materials, utility bills such as gas and electricity All costs to make prototypes even if they are unsuccessful You can claim up to 65% of SME’s sub-contractor fees related to R&D projects


How do you claim for R&D tax credits?

Despite the manufacturing industry claiming the largest portion of R&D tax credits across the UK economy, there are still many businesses who could be missing out. At Mercer & Hole, we have expertise in the manufacturing sector and can help you navigate through the process to ensure you claim the full amount across your R&D projects. Please don’t hesitate to contact us for support and advice.


Mark pashley corporate and business tax partner

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