Manufacturing and Engineering
Many UK engineering based manufacturing companies are undertaking R&D although they don't necessarily recognise it. In the face of overseas competition for low cost, large volume orders, UK companies have tended to specialise in designing and developing more complex products. They often undertake qualifying R&D activities when they work on designing a new production process for a complex part they have not made before.
For example precision engineers will often undertake R&D to develop new manufacturing processes for complex turned and lathed parts, using state of the art computerised milling and lathing machines. Equally the development of raw plastics formulas, or assembly jigs to aid manufacturing processes for printed circuit boards, or the development of new printed circuit boards, or new machinery for other manufacturers to use, are all likely to involve qualifying R&D activities. Also food, drink, cosmetic and chemical manufacturers often undertake qualifying R&D as part of new product development activities.
The example below is an example of an R&D claim by an Essex based manufacturer of precision lathed parts.
R&D in manufacturing – precision engineering
We make complex precision engineered milled and lathed parts. We are often involved in designing a new manufacturing process for a part that has been previously made or for a new part. The development activities that we have assessed as qualifying for R&D tax credits include:
- Using CAD software to create a technical drawing of the parts.
- Deciding on which machine is best suited to the job (this may involve some experimentation).
- Determining the tools needed and in some cases make new tooling.
- Setting up and programming the tooling – developing an optimum process to make a quality product for an affordable price.
- Conducting one or several manufacturing trials.
All the above is often done at our own cost in order to secure volume orders.
In carrying out the manufacturing development process we face a number of technological uncertainties that we must resolve, including:
- what manufacturing process will achieve an optimum cycle time and price point;
- how to design the manufacturing process to deliver the right tolerances/quality;
- which machine, which tools, what sequence and what materials to use;
- how to minimise tool wear and tear in the manufacturing process.
What was the financial benefit?
- Company annual turnover – £1.5 million
- Number of employees – 20
- R&D expenditure in 2014 – £120,000 (mainly staff time)
- Corporation tax saved – £16,700 / Cash credit claimed – £7,400
- Total benefit in 2014 – £24,100
- Total benefit over three years – £68,700 Click here see if your company could qualify
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Are you ready to find out if you qualify or how much your R&D claims could be worth?