What is R&D in the engineering industry?

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Gateley Capitus

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Engineering focuses on solving technical problems with intelligent solutions. Therefore research and development (R&D) is crucial in the engineering industry for the continuous development of next-generation products, infrastructure and technologies to keep existing assets and systems working.

This R&D activity can range from digital design, the modelling of products, developing and testing prototypes and in-depth testing, followed by analysis to overcome implementation challenges.

As a result, the majority of engineering firms could be eligible to claim R&D tax relief on engineering activity where there is an advance in science or technology through the resolution of scientific or technological uncertainty. Designed as an incentive by the UK government, the R&D tax credits scheme looks to reward companies undertaking such innovation and development activities. The relief is based on the costs that companies incur as a result of R&D activity and can be used to either reduce the amount of tax your company pays or received as a cash payment from HMRC. Engineering companies can then re-invest the deduction into further R&D activity.

Defining qualifying engineering activities for the R&D tax credits scheme

When defining qualifying engineering R&D activities for claiming tax relief, HMRC’s guidelines can be seen as broad. However, typical examples within the engineering industry include:

  • developing a new or changing a product or process that is more reliable, accurate or efficient;
  • designing, constructing, and testing product prototypes;
  • innovative product development using computer-aided design tools, including the development of three-dimensional solid modelling;
  • integrating new materials to improve product performance and/ or manufacturing processes;
  • reverse engineering legacy equipment in order to replace or improve performance; and
  • designing and developing new components, including:
    • faster, more efficient, more accurate, better quality
    • reduced errors/ faults/ failures/ reduced shrinkage
    • reduced waste, increased output, minimised variability
    • using new materials
    • new mechanical finish.

R&D activity occurs throughout the complete lifecycle of engineering projects

Through investigation of an engineering project, it is possible to identify that R&D activities could potentially occur throughout the complete lifecycle of a project.

At the start of a project, the definition of the technical objectives could identify the specific technical risks and uncertainties that result from conducting feasibility studies.

The development phase of the project could see the presence of R&D in areas of computer-aided design, plus any physical design and development activities, in conjunction with analytical activities.

Engineering projects often require the development and testing of prototypes where there is uncertainty over the outcome of the trials. This could result in further design development and additional prototype or technical testing, which again could potentially qualify as R&D activity. Integration of the developed component into a larger assembly could involve research and development if you are uncovering technical problems and there is technical uncertainty in seeking to resolve them.

Contact Gateley Capitus for a free consultation

Our R&D tax specialists will happily provide a free consultation to discuss your engineering activities over the past two years, as well as future plans, to see if you could qualify for this important tax incentive. If you are already claiming R&D tax credits, our team will be able to assess your claims to see how you could benefit from their experience and expertise in this area.

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