Manufacturing and Engineering R&D Tax Credit Specialists
Manufacturing and engineering work qualifies for R&D tax relief when it tries to create or appreciably improve a product, process or material, and the way to do it was uncertain to a competent engineer. Much qualifying work happens on the shop floor, in trials and tooling changes, rather than in a separate lab.
What manufacturing work qualifies?
Manufacturing work qualifies when your engineers had to experiment because the answer was not known. Manufacturing is the largest claiming sector in the UK by number of claims, at 27% of claims in 2024 to 2025.
Examples that can qualify
- Developing a new process, or improving yield, tolerance or speed beyond what existing methods achieve
- New materials, coatings or composites with properties not available off the shelf
- Designing bespoke tooling, jigs or automation where standard solutions failed
- Prototypes and pilot plant built to test whether a design works
- Reducing energy, waste or emissions where the technical route was uncertain
Examples that usually do not
- Buying and installing standard machinery as supplied
- Routine quality control and testing to known standards
- Commercial production runs and items sold to customers
- Cosmetic changes to products or packaging
- Value engineering using established methods
What costs do manufacturers claim?
Manufacturing claims usually include engineers' and technicians' staff costs, consumable materials used up or transformed in trials, utilities used in testing and prototype parts. Materials in prototypes later sold, or in production items, do not qualify. Capital equipment is excluded from R&D relief but may qualify for capital allowances, including R&D allowances for capital spent on R&D.
Where do manufacturers go wrong?
- Under claiming, by ignoring trial work done by production staff
- Including materials that ended up in saleable products
- Claiming whole projects when only the uncertain stages were R&D
- Weak records of trials and their results
What should a manufacturing specialist bring?
A manufacturing specialist should include people with engineering backgrounds who can walk the floor, understand your process and identify the uncertain stages. They should also coordinate with your accountant on capital allowances and Patent Box where relevant.
Example: how a manufacturing uncertainty is described
Illustration. A precision engineering firm was asked to machine a thin-walled part in a nickel alloy to a tolerance its existing processes could not hold, because the part distorted as material was removed. Published machining strategies did not solve the problem at that wall thickness. The team trialled fixturing, tool paths and cutting parameters across several scrapped batches before finding a repeatable process. The trials, scrapped material and engineers' time were R&D; the production run that followed was not.
Typical cost profile
| Cost type | How often it features | What to watch |
|---|---|---|
| Engineers' and technicians' staff costs | Almost always | Include production staff time spent on trials |
| Materials consumed in trials | Very common | Exclude anything sold or used in production |
| Utilities used in testing | Common | Use metered or reasoned apportionment |
| Contracted testing | Common | From April 2024, generally UK work only |
| Capital equipment | Common, but excluded | Consider capital allowances instead |
What does HMRC focus on in manufacturing claims?
- Whether the improvement was appreciable, not a minor adjustment
- Whether known engineering methods would have solved the problem
- Whether trial output was sold, which removes the materials cost
- How production staff time was separated between trials and normal work
Patent Box and capital allowances
Manufacturers that patent new products or processes may also benefit from Patent Box on the resulting profits, and equipment bought for R&D may qualify for capital allowances. A specialist should look at all three together. See our Patent Box page.
What should you ask an R&D specialist about manufacturing claims?
- Will someone with an engineering background visit our site?
- How will you identify trial work done by production staff?
- How will you treat materials from trial runs, including any that were sold?
- Will you review capital allowances and Patent Box at the same time?
Manufacturers often under claim because R&D happens on the shop floor. A specialist who understands production can find qualifying work while leaving out routine improvement.
Frequently asked questions
Can we claim if we used a subcontractor for testing?
Possibly. Under the merged scheme, the company that decides to carry out the R&D can usually claim for contracted-out work, subject to rules. Since April 2024 the work generally needs to be done in the UK.
Does improving an existing product count?
Yes, if the improvement is appreciable and achieving it involved technological uncertainty, rather than applying known methods.
Do machine purchases qualify?
Not for R&D tax relief, which covers revenue costs. Capital spent on R&D may qualify for R&D allowances instead.
Can we claim if the project was for a single customer order?
Possibly. The question is whether your company decided to undertake the R&D or whether the customer intended or contemplated it when placing the contract.
Do scrapped batches qualify?
Materials consumed in scrapped trial batches can qualify as consumables, provided the output was not sold.
Does ISO or certification work count?
No. Meeting known standards is routine, even if it takes significant effort.
Get matched with a vetted R&D tax specialist
Tell us what you do and roughly what you spend on development. We check the basics, then introduce you to a specialist from our panel whose sector experience fits your work.
- Free to use, with no obligation to appoint anyone
- Introductions only to firms that meet our panel criteria
- Fee terms in writing from the firm before you sign anything
- We flag claim deadlines we can see from your answers
Our matching service is free for businesses. Specialist firms on our panel pay us a fee when we introduce a business to them. That fee does not change the price a firm quotes you, and you are never obliged to appoint anyone we introduce.