Introduced by the UK Government in 2000, the R&D tax relief scheme is designed to encourage innovation and global competitiveness by allowing companies to reclaim some of the money invested in qualifying research and development. R&D tax credits are generally considered to be one of the most attractive tax reliefs available, often resulting in significant cash repayments from HMRC.
What are the benefits?
The benefits of the programme include increased cashflow, which is especially important to innovative, developing companies. It also encourage development or a corporate philosophy that embraces innovation and improvement.
Do you qualify?
A common misconception is that the scheme is just for companies with R&D departments and men in white coats. The fact is that any company that spends money trying to improve a product or service through a technological advance, using qualified staff and appropriate project controls, and where there's doubt about the project's success is likely to be eligible.
R&D in Additive Manufacturing (3D printing)
In the last ten years, we have seen exponential growth of interest in 3D printing and in the development and application of new materials, replacing traditional manufacturing techniques like injection moulding and CNC machining.
3D printers release creativity within their engineering teams, enabling rapid production of highly accurate prototypes at low cost. Allowing engineers to experiment with novel designs and materials and manufacture operationally durable tooling with significant cost reduction and with a few days lead time, giving back control of manufacturing improvement projects back to the engineering department. All of which can involve R&D eligible activity.
What are the potential areas of eligibility?
If you use of 3D printers as part of your R&D processes, the following kinds of activities are eligible for R&D relief:
- Design work (where it’s not routine) – Creating new and improved products normally requires numerous 3D printer design prototype iterations. Investigating using different materials, or blends of materials. Both the time spent on wages and materials costs (the material used for 3D printing) during the creation of these prototypes should be eligible for R&D tax credits. This includes the designers’ time, and a percentage of the CAD package license.
- Test / redesign – New and improved products require testing and quality control processes. Staff time costs involved in this activity is usually eligible for R&D tax relief
- Advances in material properties, such as increase in yield or tensile strength, increase in toughness, corrosion resistance, and resistance to fatigue. Attempting to replicate the strength and robustness of different materials using 3D printed components, or developing previously unachievable components designs using 3D printing.
- Development of 3D scanning, modelling and printing methods – Uncertainties may include prototype design, material selection and durability, form factor and comfort, speed of adjustment, development of improved models.
What problems might a company face?
- 3D printing opens up the possibility to manufacture parts which could not be produced utilising conventional methods. However, printing parts can often be challenging as they are built up layer by layer often requiring multiple design cycles to produce a design which can be manufactured.
- The range of material supported by 3D printing is increasing with time resulting in a range of choices. However, specific material properties might not be available from the currently supported material.
- 3D printing can be a time consuming task which can limit the viability of the technology for the production of multiple prototype parts.
- One business involved in plastic injection moulding and working on reducing processing time and contamination for medical components, used 3D printing to improve the accuracy of its moulds.
- The company applied new vacuum casting processes, allowing it to reduce process times by 3% and contamination rates by 15%, which in turn reduced rework and waste.
- As an added bonus, the above 3D printing project allowed the business to benefit from £76,500 in R&D tax relief over a three-year period.
If you can answer 'Yes' to most of these questions then, based on our experience across thousands of clients, it looks like you could have a successful claim:
- Have you developed new tools, products or services using technology?
- Have you tried to improve your existing products through technical changes?
- Have you had to resolve technical problems with any of your products?
- Have you found more efficient ways to produce your products or services?
- Have you experimented with new equipment or production techniques?
- At the start of a project, did you ever think 'I'm not sure of the best way to do this'?
- Have any of your projects failed for technical reasons?
Don't forget Capital Allowances!
Capital allowances let companies write off the cost of certain capital assets (such as investments in plant and machinery) against taxable income, allowing them to lower their corporation tax bills.
The UK Government recently made capital allowances even more generous to stimulate business investment. This is great news for companies buying 3D printing equipment before 31 March 2023, as they can now claim 130% super-deduction capital allowances on their purchase.
This means on a £100k printer there is tax relief available on £130K and the tax saving is therefore £24,700 (130k x 19%) in one year. For individuals and LLp’s there is 100% tax relief through the Annual Investment Allowance.
The government hopes that this super-deduction will give companies a strong incentive to make additional investments, and to bring planned investments forward.
We are R&D and innovation funding experts. We help companies accelerate their innovation activity by identifying and securing appropriate funding in the form of grants, tax incentives or commercial funding.
We specialise in helping companies who are already claiming tax incentives but are looking to optimise their claim, experience a better service or pay a more competitive price – or all of the above of course.
With 30+ years heritage and 200 experts, we manage +£870million of innovation incentives annually across 19 countries, for some of the world's best known brands.
Whatever innovation funding challenges you face - wherever you're based - we can help.