Reducing Costs for Precision Engineering R&D

Whether it’s in the engineering, manufacturing or fabrication industry, the fundamentals of precision engineering are the same… to take theory and turn it into reality.

Which is why the typical focus of precision engineering often lies in developing ultra-precision technology to create incredible accuracy, improved quality, greater modernisation, better cost reductions and extended life spans.

It therefore makes sense that the activities conducted within precision engineering are often considered as research and development (R&D); because activities are conducted in order to push the boundaries and achieve further advances within the fields of technology and science.

This R&D qualification means that manufacturing or fabrication businesses that conduct precision engineering can gain access to a government incentive to reduce corporation tax bills. So why is it that this incentive is often overlooked or dismissed?


R&D Tax Relief for Precision Engineering Projects

The reason that some manufacturing or fabrication companies aren’t claiming R&D tax credits is simply because they feel that making a R&D tax claim is confusing and complex; that their time would be better spent on continuing their business activities.

In some respects, they are right. Identifying eligible R&D activity accurately is a challenge, simply because the considerations are so broad. However, that definitely doesn’t mean that R&D tax claims should be overlooked. These claims can go a very long way in supporting businesses in continuation of their efforts in precision engineering, by providing financial support that helps to  offset the costs of the R&D activities conducted.

So rather than avoiding the complexities of making an accurate R&D tax claim, it is possible to simply pass the hard work over to R&D specialists. These specialists can then evaluate your projects to establish if R&D activities took place, and then complete the R&D tax claim on your behalf. All you’ll need to do to start the process is identify projects where R&D activities may have taken place so they can be considered by our R&D expert.

To help you do this we’ve put together some helpful information.


Are You Conducting R&D Through Precision Engineering?

You may have conducted many projects using the tools and knowledge of precision engineering, however there are only certain projects where the activities conducted are eligible for R&D tax relief.

The R&D guidelines provided by the HMRC say that these projects should seek to extend overall knowledge or capability in a field of science or technology. In other words, if the project is pushing the boundaries of physics, mechanics or electronics, (for example by developing flexible phone screens) then certain costs associated with the development activities could be claimed.

The eligibility for these projects also extends to:

  • Using new knowledge or capabilities to make something new
  • Making improvements to an existing product or process; perhaps making it cheaper, with less waste or with greater reliability
  • Making something that already exists, but in a completely different way

Of course, with many activities in precision engineering aiming to improve tolerances (both individual and stack), improved assembly and dimensional stability then it can be difficult for engineering, manufacturing and fabrication firms to identify which activities are eligible for R&D tax relief.

However, as we’ve evaluated and submitted many R&D claims for precision engineering, we can identify areas when R&D is most likely to be carried out, for example:

  • When it’s necessary to make special tools or jigs to assist in development. Tools or jigs for production are not eligible for R&D claims.
  • The need to make prototypes, perhaps to test new processes, unusual materials or shapes.
  • When the time to manufacture a first of type is greater than a production norm; that is the first process / product taking longer to achieve as compared to the mature, steady state of production.
  • When manufacturing processes are changed to improve the target output, such as conducted to improve a Cpk or Ppk
  • Investigations into process failures. When components or assemblies fail to achieve the required output / tolerances, becoming scrap. The process of investigating the cause of the failure could be eligible as R&D.
  • In service failures, where investigations are also required into identifying and solving the root cause.

If you can identify a project, or particular effort that was made to achieve a solution, or enhancement then that’s a start. For that precision engineering effort to be eligible for R&D tax relief, there would, typically, have to be no obvious solution, or route to success available to your business or in the public domain; basically, the project was started without truly knowing how to solve it, or even if it would be successful. Alternatively it may be that the obvious solution proved unsuccessful or impractical for any reason and there was no credible alternative.

The good news is, that R&D tax relief is based on the costs associated with the development stages, so even if the end product or goal was not realised, the efforts made to overcome the challenge could be eligible. This includes receiving relief on a proportion of the costs, such as salaries of those involved in the development as well as some of the materials used in testing and prototypes – a useful amount that could definitely be put to good use for further precision engineering projects.

So rather than dismiss R&D tax relief for precision engineering, why not use it as an incentive to pursue new and challenging projects; to offset R&D losses from efforts made in the past two years or to help you invest in new precision tool technology.

It all starts with a phone call where you will receive expert, friendly advice that will help you determine if you really can benefit from this useful UK government incentive for precision engineering R&D.

For further information on how much you can receive back, visit this page.




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