R&D Tax Credits for Manufacturing Companies

When most people hear of R&D, they think of large multinationals employing scientists in white coats. However, the majority of the claimants taking advantage of the program are small to medium sized enterprises from all sectors of the economy, and:

• Most claims we see are for Development rather than Research
• Qualifying projects attempt to develop a new or improve an existing material, device, product, or process
• The work performed seeks a technological advance by resolving areas of technological uncertainty
• If your engineers or technologists encounter failures in the course of their work, or it takes longer than projected this may point to projects that potentially qualify for R&D tax relief
• Design work and feasibility studies may qualify to the extent that the study is related to the development of a technological advancement
• Lack of documentation may not be an obstacle

It is the set of obstacles that you encounter as you strive to increase product quality, production levels, advance the functionality of products, develop new technologies etc. ,in the pursuit of business goals, that determine eligibility, not the business goal itself.

Contact us today to see how we can help you determine if you can benefit from this valuable R&D tax relief scheme >

Find out how much tax rebate you could claim with our R&D Tax Credit Calculator >

Unlock R&D Tax Credits on Your Manufacturing Innovation

Manufacturing makes up 26% of all UK R&D tax credit claims (HMRC, Sept 2025) — yet many manufacturers still leave tens of thousands of pounds unclaimed each year.

If your engineers are solving technical problems on the factory floor, you may be doing qualifying R&D without realising it.

Are You Missing Out?

You do not need a lab or people in white coats.

If you are:

• Developing new products or variants
• Improving production lines or automation
• Integrating new materials or coatings
• Designing bespoke tooling, jigs, or fixtures
• Tightening tolerances or improving quality
• Reducing waste, emissions, or energy use
• Connecting machines, sensors, and software (Industry 4.0)

…there is a strong chance you are carrying out R&D for tax purposes.

Under the DSIT Guidelines (2024), work qualifies where you:

• Seek an advance in science or technology, and
• Face scientific or technological uncertainty that a competent professional could not easily resolve at the outset.

If your team is experimenting, iterating, and sometimes failing on the way to a solution, that activity is very likely in scope.

Typical Qualifying Activities in Manufacturing

Manufacturing R&D often includes:

• New product development

Designing and prototyping products that need new engineering solutions, new material combinations, or performance beyond current capabilities.

• Process innovation

Developing or significantly improving manufacturing processes, automation, robotics, or line layouts where the solution is not obvious.

• Material integration

Working with new or unfamiliar composites, alloys, polymers, or coatings where behaviour in your process is uncertain.

• Tooling and fixtures

Creating bespoke tooling, jigs, moulds, or fixtures to achieve higher precision, speed, or repeatability than standard methods.

• Quality and testing

Developing new test methods, inspection systems, or QA processes to meet tighter tolerances or new standards.

• Environmental and regulatory compliance

Innovating to meet new emissions, waste, or environmental targets where off‑the‑shelf solutions are inadequate.

• Digital manufacturing / Industry 4.0

Integrating IoT, data, machine learning, digital twins, or advanced automation where system interactions are technically uncertain.

• Energy efficiency

Engineering changes to processes or equipment to significantly cut energy use where the route to that improvement is not straightforward.

How the Merged R&D Scheme Works (From 1 April 2024)

For accounting periods starting on or after 1 April 2024, manufacturers claim under the merged R&D Expenditure Credit (RDEC) scheme:

• Credit rate: 20% of qualifying R&D spend
• Net benefit (typical): ~15p per £1 after 25% corporation tax
• Example: £300,000 qualifying R&D → approx. £45,000 in tax relief

If you are loss‑making and your qualifying R&D is ≥30% of total expenditure, you may access Enhanced R&D Intensive Support (ERIS) with a payable credit of up to 27%.

Costs You Can Claim

Common qualifying cost categories include:

• Staff costs – salaries, employer NIC, and pensions for engineers, designers, technicians, and relevant production staff
• Subcontractors – UK‑based subcontracted R&D (usually at 65% of the invoiced cost under the merged scheme)
• Consumables and materials – raw materials, components, and consumables used or transformed in prototyping, trials, and experimental runs
• Software licences – CAD/CAM, simulation, FEA, CFD, and other tools used directly in R&D
• Cloud computing and data – processing, storage, and data used in R&D (eligible from 1 April 2023)
• Utilities – heat, light, and power used in R&D activities

Prototyping:

• R&D prototypes (where performance or feasibility is still uncertain) usually qualify.
• Pre‑production / commercial prototypes (routine manufacturing preparation) generally do not.

Where Manufacturers Commonly Under‑Claim

Many qualifying activities are overlooked because they are seen as “just part of the job”. Examples:

1. Everyday problem‑solving

If your team is running trials, changing parameters, and learning from failures to crack a technical issue, that is often R&D.

1. Design and feasibility work

Technical design iterations to resolve engineering challenges (not just aesthetics) are typically in scope.

1. Failed or abandoned projects

R&D does not have to succeed. Costs on projects that were stopped due to technical barriers can still qualify.

1. Incremental process improvements

Making a process faster, more precise, more energy‑efficient, or able to handle new materials can qualify if there was genuine uncertainty.

1. Multi‑disciplinary projects

Mechanical, electrical, software, and materials work can all contribute qualifying R&D within a single project.

What HMRC Wants to See

With HMRC’s increased scrutiny, clear documentation is essential. Strong claims usually include:

• A clear description of the technical challenge or uncertainty
• Evidence of the baseline – what was already known and why existing solutions were not enough
• Records of approach and experimentation – design iterations, test plans, parameters, and results
• Evidence of failures and learning along the way
• Time records showing who worked on qualifying activities and for how long
• A clear split between R&D costs and routine production or commercial work

Contemporaneous records (kept during the project) carry far more weight than notes created afterwards.

Why Manufacturers Work With Innovation Plus

Manufacturing R&D is rarely confined to one discipline. It can span:

• Mechanical and process engineering
• Materials science and chemistry
• Electrical and controls engineering
• Software, data, and automation

We combine technical specialists with real manufacturing experience and R&D tax expertise to:

• Identify qualifying activities that non‑specialists often miss
• Translate your engineering work into the technical language HMRC expects
• Structure claims to maximise relief while remaining robust under enquiry

We support manufacturers across:

• Precision engineering
• Automotive and aerospace
• Food and beverage
• Chemicals and coatings
• Plastics and composites
• Electronics and electrical equipment
• Medical devices
• Construction products

We work on a success-fee basis. No upfront costs. You only pay when your claim succeeds. Our enquiry defence service is included as standard.

Next Step: Get an Honest Assessment

If your manufacturing business is developing new products, improving processes, overcoming material challenges, or tackling any production problem where the technical outcome is genuinely uncertain, there is a strong chance you have a valid R&D tax claim.

Contact us for a free, no-obligation assessment. We will tell you honestly whether your work qualifies — and if it does, we will handle the entire claim process.

No upfront fees. No inflated claims. Just rigorous, compliant R&D tax advice for manufacturing.