R&D in UK Manufacturing
Developed to perform
As the definition of Research & Development (R&D) for the purposes of the tax relief becomes more clearly defined and tested, it is apparent that many activities undertaken to develop and improve manufacturing processes qualify for the relief. Although the actual number of companies claiming the relief is increasing, most companies are still not claiming for all eligible activities, specifically those occurring outside their product development or research centres. Can you afford not to be sure?
Studies have shown that companies which invest in R&D grow and prosper in increasingly competitive markets. The UK Government has realised the importance of this type of investment and is going to great lengths to ensure that it is supported. To this end it has introduced significant tax incentives for R&D activities. From 1 April 2008, companies are able to claim a cash tax saving of between 8.4% and 21% of eligible activities.
Our secret is a clear, business-focused approach. Claims should not be relegated to a tax function questionnaire but should be part of operational and budget planning. Equally, breaking projects down to too low a level may mean that very little will qualify. It is also essential that both the finance and technical functions work together to review potentially qualifying activities. More importantly, this team work needs careful coordination as those groups often have different priorities and objectives. Initially, building on the experiences of our US and Canadian practices, where R&D reliefs have been available for many years, over the last four years we have established a multi-disciplinary team in the UK bringing together software engineers, chemists, scientists, automotive industry experts and manufacturing engineers together with experienced accountants and tax specialists.
The R&D tax relief regime has suffered from widely held misconceptions about the extent of its availability. Please contact us if you would like to talk about any of the issues raised above in relation to your company.
For more information, download our publication R&D in UK Manufacturing: Developed to perform (PDF, 155KB)
Manufacturers miss out on R&D tax relief