Overview

Almost any type of engineering firms could be eligible to claim R&D Tax Credits providing that their projects and activities meet the criteria and they pay Corporation Tax in the UK. Engineering subsectors that are rich in opportunities for claiming include:

• Aerospace & Avionics
• Architectural Engineering
• Automotive Engineering
• Biochemical Engineering
• Building and Construction Engineering
• Chemical and Engineering
• Civil Engineering
• Defence Technology Engineering
• Electrical and Electronics Engineering
• Environmental Engineering
• Geotechnical Engineering
• Hydrology Engineering
• Manufacturing Engineering
• Marine Engineering
• Materials Engineering
• Mechanical Engineering
• Petroleum, Oil & Gas Engineering
• Plant Engineering
• Power Engineering
• Rail Engineering
• Software Engineering*
• Surveying Engineering
• Systems Engineering
• Telecoms and Networks Engineering
• Transportation Engineering

What types of engineering projects and activities qualify?

The government’s guidelines for what activities qualify for R&D relief are broad, though each claim will be assessed by HMRC on its own merits. It is often not a simple matter to determine what you should and should not claim for. As a baseline requirement, a qualifying project must seek an ‘advance in science or technology’ and have ‘had to overcome technical or scientific uncertainty’.

In the engineering context, your project stands a good chance of qualifying if:

• It involves creating new designs or prototypes
• It involves the use of new materials or a new combination of materials
• It results in an appreciable improvement to an existing product or process
• It results in streamlining a process through automation
• It is implemented in a unique or challenging environment
• It involves a new or improved design of machinery, component or electronic products
• It involves going through multiple technical iterations before going into production

These are just a few typical examples though they should not be interpreted as projects that will automatically qualify.

Tips on claiming R&D tax credits in the engineering sector:

• You are able to submit claims for projects that took place up to 2 accounting periods ago and all subsequent projects. Any projects that took place before that will not be eligible.
• You can claim once a year for future eligible projects
• The value of your claim will depend on a number of factors. The main factor is expenditure – the amount that the eligible activities cost your firm
• You can expect to claim about 26% of qualifying expenditure
• Qualifying expenditure can include salaries, contractor costs, subcontractor costs and consumables / scrapped materials/ prototype coss
• The qualifying activities can take place anywhere in the world, but must be funded by a UK-registered business

How we can help

By choosing Innovation Plus as your R&D tax credit claim partner you will benefit from:

• An expert team that will take care of the entire claim process and build an optimal claim around all your eligible engineering projects
• The assurance that your claim will be successful. We have maintained an exceptionally high success record for claiming on behalf of our clients since 2009.
• An optimal claims process that will maximise the value of your claim
• Our in-house financial, legislative and technical experts, all under one roof
• Being able to leverage our excellent working relationship with the R&D tax inspectors underpinned by the excellent quality of our claims

We can give you a definitive answer on your eligibility and the overall R&D tax position of your engineering firm through an obligation-free phone consultation – simply contact us to arrange this.

R&D Tax Credits for Engineering: Key Takeaways

• Most engineering disciplines can qualify for UK R&D tax credits if they tackle genuine technological uncertainty that a competent professional could not readily resolve at the outset.
• Qualifying work must:

1. Seek an advance in science or technology; and
2. Address scientific or technological uncertainty through a systematic approach (design, test, iterate).

Commonly Qualifying Engineering Activities

• Design & Prototyping: New or significantly improved products, systems, or structures where performance, reliability, or feasibility is uncertain until tested.
• Materials & Processes: Novel materials, coatings, composites, or manufacturing/process improvements where behaviour or interactions are not predictable.
• Challenging Conditions: Engineering for extreme or unusual environments (temperature, pressure, vibration, corrosion, subsea, hazardous, constrained access).
• Complex Systems: Integration of mechanical, electrical, software, and control systems where interactions are complex and outcomes uncertain.
• Automation & Modelling: Non-standard automation/robotics and advanced simulation (FEA, CFD, etc.) where models must be validated and refined through experimentation.

Examples by discipline include:

• Civil/Structural: Foundations in difficult ground, novel structural forms, complex temporary works, constrained retrofits.
• Mechanical: Bespoke machinery beyond proven capabilities, high-precision tooling/processes, complex thermal/vibration/fatigue problems.
• Electrical/Electronics: Demanding power electronics, constrained embedded systems, EMC/EMI challenges, novel sensing and signal processing.
• Environmental/Process: Advanced treatment, remediation, emissions reduction, and energy recovery systems beyond established performance envelopes.

Failed or abandoned projects still qualify if they involved genuine technological uncertainty and systematic investigation.

The Merged R&D Scheme (From 1 April 2024)

• All companies use the merged RDEC scheme.
• Credit rate: 20% of qualifying R&D expenditure.
• Typical net benefit: ~15p per £1 of qualifying spend (assuming 25% corporation tax).
• Illustration: £200,000 qualifying R&D → approx. £30,000 net benefit.

For loss-making, R&D‑intensive companies (R&D ≥ 30% of total expenditure), Enhanced R&D Intensive Support (ERIS) can provide a payable credit of up to 27% of qualifying spend.

Engineering R&D Tax Relief – What You Can Claim & How We Help

Costs You Can Claim (R&D Proportion Only)

You can include the R&D proportion of these costs in your claim:

• Staff costs

Salaries, employer NIC and pension contributions for employees directly engaged in R&D, including:

• Engineers doing design, analysis, testing and development
• Supervisors overseeing R&D work
• Certain support staff, where a reasonable proportion of their time is spent on R&D
• Subcontractor costs

65% of payments to subcontractors who carry out qualifying R&D activities on your behalf.

• Consumables

Materials and resources that are used up in the R&D process, such as:

• Raw materials, components, and assemblies used in prototypes
• Test pieces and samples that are scrapped
• Power, fuel and utilities consumed during R&D trials and testing
• Software licences

Specialist software used directly in R&D, for example:

• FEA and CFD tools
• CAD simulation and modelling
• Control system development and embedded software tools
• Cloud computing and data (from 1 April 2023)
• Cloud services used in R&D (e.g. scalable compute for simulations, test environments)
• Data licences used in R&D (e.g. datasets for modelling, training, or validation)

If a project supports both production and R&D, you must sensibly apportion costs between routine operations and experimental work. Common methods include:

• Time sheets and time records
• Project codes and cost centres
• Engineering judgement backed by contemporaneous evidence

What HMRC Expects to See in Engineering R&D Claims

To support an engineering R&D claim, HMRC expects clear evidence of:

1. Baseline

The existing state of engineering knowledge or technology in the relevant field at the start of the project. This should show:

• What was already known or available
• Why off‑the‑shelf solutions or standard methods were not sufficient

1. Technological Uncertainty

A specific scientific or technological question that a competent professional could not readily answer at the outset, such as:

• Can we achieve these performance, reliability, or tolerance targets with current materials and methods?
• Can we integrate these systems or technologies without unacceptable trade‑offs (e.g. weight, cost, thermal performance, safety)?

1. Systematic Work

A structured programme of investigation to resolve the uncertainty, typically involving:

• Concept and detailed design
• Calculations, modelling, FEA/CFD, simulations
• Prototyping and rig builds
• Testing, measurement, and validation
• Iteration and refinement based on results

1. Outcome and Learning

A clear explanation of:

• What you tried and why
• What worked and what failed
• What you learned about the underlying technology
• Whether the uncertainty was fully resolved, partially resolved, or remained unresolved

HMRC will scrutinise whether the work goes beyond established engineering practice. Work is not R&D for tax purposes if it is:

• Merely new to your company but standard in the industry
• Routine design, scaling, or implementation using known methods
• Standard application of existing tools, codes, and design rules

The uncertainty must be one that a competent engineer in the relevant discipline could not resolve using available knowledge, published information, and standard techniques.

Evidence HMRC Expects (Contemporaneous Records)

Robust, contemporaneous evidence is essential. Useful records include:

• Design calculations, drawings, models, and specifications
• FEA/CFD analysis reports and simulation outputs
• Test plans, test results, and prototype assessments
• Project meeting notes, technical reviews, and decision logs
• Iteration records showing:
• Changes to designs or parameters
• Reasons for changes
• How test results fed back into the next iteration

These documents help demonstrate that you followed a systematic, investigative process to resolve genuine technological uncertainties.

Why Engineering Companies Work With Innovation Plus

Engineering R&D is often under‑claimed because it is seen as “just good engineering” rather than innovation. Many generalist R&D advisers:

• Miss qualifying engineering activities
• Struggle to describe the work in the technical language HMRC expects
• Over‑claim on marginal activities, increasing enquiry risk

Our approach is different:

• We understand engineering.

We work with firms across mechanical, structural, electrical, process, and systems engineering. We know where genuine technological uncertainty typically arises — and where it does not.

• We write technically robust narratives.

Every claim includes a structured technical report that:

• Defines the baseline and uncertainties clearly
• Describes the systematic work (design, analysis, prototype, test, iterate)
• Uses engineering language and evidence that aligns with HMRC guidance
• We don’t over‑claim.

Engineering claims are under increasing scrutiny. We focus on defensible, compliant claims, not inflated figures designed to impress at the point of sale.

• We work on a success‑fee basis.

No upfront costs. You only pay when your claim succeeds.

• We support you if HMRC enquires.

Our enquiry defence service is included as standard, so you are not left to deal with HMRC alone.

Next Step: Get an Honest Assessment

If your engineering firm designs, develops, tests, or improves products, structures, systems, or processes that involve genuine technical challenges, there is a strong chance you have a valid R&D tax claim.

Contact us for a free, no‑obligation assessment. We will:

• Review your projects and activities against HMRC’s R&D criteria
• Identify where genuine technological uncertainties exist
• Advise honestly if your work does not qualify
• Handle the entire claim process if it does qualify

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