Manufacturing R&D – How to prepare your claim

Identifying eligible costs

The scheme is designed to capture the full cost of innovation if your business is attempting to resolve scientific or technological uncertainties. It’s common for manufacturing claims to exclude the initial planning stages of a project. However, activities such as identifying technical uncertainties, reviewing baseline technologies, feasibility studies and initial planning, which occurs in the initial stages are all potentially eligible under the R&D scheme. 

Work undertaken after a product is released can be claimable as well. For example, design projects to overcome component obsolescence can be claimable when the work faces technical challenges to replace components or assemblies. 

The later development stage including testing, implementation and prototyping are all potentially eligible under the R&D scheme too. Businesses need to record the technical challenges encountered in each stage of development to maximise the R&D benefits. To optimise your claim, it’s best to plan your development to ensure that all potentially eligible work is recorded and clearly identified.

The most significant area missed, or incorrectly claimed within a manufacturing R&D claim is the trialling and testing costs. Any claim can pick up the consumable costs and production labour associated with the following:

• Prototyping and prototype testing for the new or improved products being developed
• Testing material durability
• Scaling-up development
• Productioniastion of the new products within the New Production Information (NPI) team remit

Any consumable costs associated with items that are sold must be excluded. These rules are complex, and we recommend you seek specialist R&D advice from our team. 

Submission documentation

Once you have the claim numbers sorted out, what do you need to provide to HMRC to support the claim? It’s highly recommended that you prepare a submission report to go alongside any R&D claim made. This should provide example technical descriptions that highlight the eligible work undertaken and link this work to the costs being claimed. An overview of the claim preparation process with any assumptions made should also be provided. 

We see many get this report wrong. Too often, businesses focus on the functions and features of the products being claimed. This does not provide HMRC with enough details of the technical work, and quite often, this high-level report style can end up with queries and questions being raised that delay the claim pay-out or worse compliance check. 

Submitting an R&D claim

Although the R&D tax credit scheme has been around for many years, we still find many businesses are confused about how the claim is submitted. Quite often, businesses forget that the claim is submitted as part of the tax return and don’t plan to include this step in the process. The biggest mistake we see, however, is forgetting to submit the tax return the company needs to have completed their accounts. Therefore, the R&D claim process needs to form part of your year-end compliance and should run alongside the accounts preparation to ensure that the two tie up and there are no mistakes due to the R&D claim being created from a project management system. 

How we can help

We're here to fully support you with preparing and claiming R&D tax credits. Should you choose to get specialist R&D support from Buzzacott, we will:

• Identify what scheme your business qualifies for
• Carry out a comprehensive review of your R&D activity, working with you to ensure you are maximising your claim
• Prepare a claim that minimises your potential exposure to a HMRC enquiry
• Aim to fast track your claim and avoid delays in receiving your benefit
• Guide you through the whole claim process or on certain aspects of the claim.

We also provide training and review services to our clients with in-house prepared claims to ensure that mistakes are avoided and queries from HMRC are minimised. Ultimately, our aim is to ensure that your claim is compliant with HMRC’s needs and that the submission process is as smooth as possible.  

Get in touch

If you would like to speak to one of our R&D experts to find out more about how we can help, please get in touch via the form below.