Claiming R&D tax benefits within the manufacturing sector can lead to common questions on behalf of the filing entity. As a process guide, FI Group will walk through the relevant qualifications, highlight the key benefits of investing in innovation, and describe the claiming process for potential beneficiaries.
Research and Development (R&D) refers to the activities companies undertake to drive innovation that can improve their products, processes, and overall business performance. Further, R&D Investments can be defined as supporting activities where the baseline of science or technology is advanced through the resolution of scientific or technological uncertainty that was not easily foreseeable by a competent professional in that field.
When it comes to the manufacturing sector specifically, R&D efforts are focused on developing new technologies and techniques that improve the productivity, quality, and environmental impact of their production processes.
In general, there are 4 specific focus areas of R&D in manufacturing. Let’s review them one by one.
This area of R&D in manufacturing is all about improving the actual processes used to make individual products. Manufacturers may invest in R&D to develop new processing and handling methods that boost the efficiency and consistency of their operations.
For example, a company might research and test new and more effective techniques for cutting, assembling, or finishing their products in a way that reduces waste, improves quality, and lowers costs. Or they may explore the use of new, more environmentally-sustainable materials that perform better than what they’ve used in the past.
The key goals of R&D at the per unit processing level are to find ways to make each unit or product better, faster, and more cost-effective to manufacture. This helps manufacturers stay competitive by delivering higher-quality goods at lower prices.
A major focus of R&D in manufacturing is improving the equipment and machinery used on the factory floor. Manufacturers invest heavily in developing new, more advanced production machines as well as upgrading their existing equipment. They are doing this in order to improve the throughput and make the manufacturing process more affordable. For example, this could involve creating specialised robots, implementing sophisticated computer controls, or redesigning key machine components.
Upgrading equipment through R&D helps companies boost productivity, meet customer demands, and maintain their competitive edge.
This machine-focused R&D is especially crucial as manufacturers adopt Industry 4.0 technologies.
R&D in manufacturing also encompasses the broader systems and infrastructure that enable the production process. Rather than focusing on individual machines, this area of research and development looks at advancing the interconnected controls, sensors, and communication networks that underpin the entire manufacturing operation.
The goal of systems-level R&D is to create more integrated, responsive, and efficient production environments. Manufacturers invest in developing new technologies that can better monitor, coordinate, and optimise their entire manufacturing system.
This could involve innovating around the automated control systems that manage production lines, the sensor networks that provide real-time data, or the software platforms that integrate disparate systems. By improving the connectivity and intelligence of these wider systems, companies can drive significant gains in productivity, flexibility, and quality.
For example, R&D into advanced manufacturing execution systems (MES) allows businesses to centrally manage and monitor the production process. Sensor-based technologies that track machine performance and environmental conditions are another area of systems-focused R&D, providing valuable insights to improve operations.
The final focus area of R&D in manufacturing is – societal or environmental level technologies. This aspect of innovation is concerned with developing solutions that promote the competitiveness and sustainability of the industry as a whole.
Whereas the other R&D focus areas centre on improving the core manufacturing processes and equipment, this domain looks outward at supporting the workforce and addressing broader environmental challenges.
One major area of societal-level R&D is enhancing the health, safety, and ergonomics of manufacturing environments. Manufacturers invest in researching new technologies and methods that can better protect their employees and improve working conditions in the factory.
This might involve developing specialised tools or machinery that reduce physical strain, or exploring AR solutions that provide real-time guidance to workers. The goal is to create a safer, more comfortable work experience that also boosts productivity.
The scope of eligible R&D in manufacturing is broad, but here is what projects it covers:
Regardless of whether you’re pioneering innovative goods or finding ways to optimise your current processes, there’s a good chance your R&D efforts can qualify for valuable tax credits. The key is understanding how the tax incentives apply to the diverse range of innovation happening in the manufacturing sector.
Claiming R&D in manufacturing can be a complex process for any business, however, you should keep in mind that you don’t have to do it alone. Collaborating with specialists who understand how to claim R&D can maximise your chance of winning it.
The FI Group team is committed to helping manufacturers like you identify every area of eligible R&D, prepare comprehensive tax relief claims, and defend those claims against HMRC inspection. We’ve got all the needed experience to ensure you receive the full value of the incentives you’re entitled to.
