R&D tax credits for manufacturing companies explained
If your manufacturing company has recently implemented a new innovative way of transforming raw material into a final product, development of production process or have been involved in any R&D project, then you might be eligible for a Research & Development Tax relief.
What are R & D tax credits for manufacturing companies?
The R&D Tax Relief incentive is a UK government initiative that is designed to encourage innovation and increase spending on R&D activities for companies.
This R&D tax credit scheme allows for a cash repayment of up to 33.35 percent of a company’s R&D expenditure. To claim the relief, you need to be an SME and show how your project meets the government’s definition of R&D.
What are the benefits of R&D tax relief and how it can benefit manufacturing businesses?
Besides being a valuable source of cash for companies, claiming R&D tax relief can assist you in the development of new streamlined manufacturing processes. It helps by putting the right quality programs and new technologies in place from the start to easily improve existing processes and realize immediate benefits. R&D tax relief can drive product development or innovation within the existing business offering.
R&D tax relief can also have cost implications by reducing your developing costs as well as diminishing your company’s corporation tax.
Finally, claiming R&D can help you get sufficient funds to collaborate with a trusted, reputable partner or a strong scientific institution for improved products in the manufacturing sector.
What are the qualifying activities for an R&D tax claim?
The following are some examples of product and process development projects that could qualify for the R&D tax relief:
– The development of techniques of processing and handling
– Streamlining manufacturing processes through automation.
– Integration of new technology with old systems.
– The design, testing, and trialing of prototypes and demonstration plans.
– New material integrating for product performance improvement and manufacturing processes.
– Increasing ease of operation or suitability of manufactured products.
– Evaluating and determining the most efficient flow of material.
What R&D expenditure can be claimed for manufacturing and engineering projects?
You can claim relief on costs that have been paid directly through the Profit & Loss account, and you can also claim capitalized expenditure in certain circumstances (providing that the assets purchased have been classified as Intangible Assets). The following are the main categories of costs that can be claimed for R&D tax credits:
– Staff costs: it includes the salary of employees who were directly involved in the project, class 1 NIC, and pension contributors.
– Subcontractors: Generally speaking, only 65% of subcontractor costs can be included in the R&D but the ruling could differ depending on the company’s size.
– Freelancers: Only 65% of costs made to external workers can be claimed.
– Consumables: Certain transformable consumables like water, power, and fuel are eligible for tax relief.
– Software: You can claim the cost of software that has been completely involved in the R&D process progression.
How to apply for manufacturing R&D tax credit?
There are some essential key steps to follow to be able to apply for an R&D tax credit claim.
First thing first, you need to assess your company’s eligibility by outlining how your R&D process works as well as the projects. Then, a report must be drafted where the qualifying criteria in claiming R&D are outlined. This report must also include the different costs involved in the R&D activity and an overview of the current financial position of the company in order to determine the most advantageous treatment of R&D expenditure for it.
Once your report is ready, it can be sent to the HMRC who aims to process the claim within 4-6 weeks. If your application proves to be successful, HMRC will send you a check for any R&D expenditure that has been surrendered for a cash repayment or tax refund as a result of the claim.
How does Veritas Noble help you?
We have a great team of experts with great knowledge in the field who can walk you through every step of the process and help you determine the projects that qualify as R&D. You can rest assured that your chances of getting a successful R&D tax relief claim will be maximized by consolidating with our team.
At Veritas Noble, we handle your R&D claim from start to finish, write the technical reports and do all the paperwork for you. Our primary claim is to have the HMRC handling your application promptly. Confident of delivering a winning service, contact us now to learn more.