R&D in Engineering is one of the fastest developing forms of innovation. As one of the broadest sectors within the UK, the engineering industry is littered with potential for Research and Development (R&D). With the industry accounting for around 18% of employment within the UK, the opportunities for innovation within both larger and smaller engineering companies are in high demand as the sector continues to grow. If you think your company may fall within the engineering sector and could be eligible for R&D tax credits, our team at Kirby and Haslam will help you along your journey towards tax relief.
What is Engineering?
We know that engineering is a broad sector which has within it many different sub sectors, but what exactly is engineering? The University of Bath define engineering as the ‘designing, testing and building of machines, structures and processes using maths and science.’ This definition can be applied to a vast array of sub sectors within engineering, for example:
- Chemical Engineering
- Construction Engineering
- Electrical Engineering
- Engineering for Machinery Manufacturing
- Transport Engineering
- Aquatic Engineering
Whilst companies within these sectors may not be strictly focused on engineering, innovative advancements within their disciplines will require some sort of unique engineering that relies on R&D.
What is R&D Within Engineering?
R&D is pivotal within engineering, as companies are constantly seeking to create innovative processes that help their company at many stages of an engineering project. These projects can range in subjectivity, with common engineering innovations being focused on areas such as efficiency, automation, safety, and sustainability of existing processes. Other projects could also focus on the designing of entirely new processes that improve on existing systems that exist within a sector. It is important to remember that R&D is not necessary throughout an entire process – if a project features R&D that has helped towards the ultimate goal of your project that you can be eligible for tax credits.
Having noted that there are a multitude of sub sectors within engineering that have potential for R&D, lets delve into some examples of how R&D has led to innovation within these sub sectors.
R&D within Chemical Engineering
Chemical engineering is a form of engineering that is concerned with the chemical production and the manufacture of products through chemical processes. This includes designing equipment, systems and processes for refining raw materials and for mixing, compounding and processing chemicals to make valuable products. From chemists in small scale laboratories, all the way up to engineers in large industrial plants, innovative activity is prevalent throughout with R&D consistently seen in many different processes. Some examples of these processes include:
- Designing innovative coatings e.g., Optical, and non-stick.
- Solving onsite technical problems during the chemical production process
- Developing pharmaceuticals
- Development of safer and sustainable pesticides
R&D within the Engineering of Machine Manufacturing
The manufacturing of machinery is one of the largest sectors within the UK, with the estimated revenue around £32.4billion in 2020. Machinery manufacturing is an industry which has seen a steady growth in relation to R&D opportunities, with the demand for innovation accelerating in line with the demand for advanced machinery in many different disciplines. Digitisation is one example within machine manufacturing that has been a driving force for R&D in recent year, with engineers continuously finding innovative ways of creating new processes that advance machine manufacturing. Some innovative ways that R&D has been used within machine manufacturing:
- Automation technology to raise efficiency of machinery
- Ability to control machines remotely in high-risk environments
- Development of technology that can better analyse and manage a machines condition and health
- Creating sustainable power solutions to large scale machinery, to cut costs and save power
R&D within Construction Engineering
According to the government, the construction sector within the UK is now within one of the greatest construction programmes in our history, with major infrastructure projects such as Crossrail and Heathrow’s third runway being the face of the programme. Coupled with the move towards cleaner economic growth, the recent boom within construction is one that has and will continue to thrive upon R&D. Some engineering activities within the construction industry that would qualify as R&D in the HMRC tax relief scheme include:
- Structural designs (unique infrastructure, optimisation of structural designs to reduce amount of materials)
- Advances in marine, coastal, and geotechnical construction
- Integrating new or improved technology or systems into a building
- Improving existing construction techniques & processes to make them more efficient
R&D within Transport Engineering
The transport sector is at an exciting stage of radical development. The opportunities offered by evolving technologies and innovation, such as new high speed rail networks and autonomous vehicles, are likely to benefit both the economy and society in the UK. Innovative businesses in the transport sector are ideally placed to capitalise on government tax incentives which reward them for research and development projects. However, just 25% of transportation firms have ever claimed R&D Tax Credits and only around 1% of total R&D claims came from the sector in 2019/2020.
At Kirby and Haslam our aim is to help transportation firms take full advantage of R&D tax credits – here are some activities within transport engineering firms that would qualify as R&D:
- Work undertaken to improve maintenance equipment to reduce delays
- Development of autonomous vehicles
- Adapting transport methods towards eco friendlier systems
- Innovative safety system on a variety of transportation
R&D within Aquatic Engineering
Aquaculture is the practice of farming seafood. It’s like agriculture, but done with fish, crustaceans and shellfish. Aquaculture businesses breed and harvest plants and animals in water – fresh water or sea water – and prepare them for human consumption. Aquaculture already provides over half of all the fish product that we eat in the world. It’s the world’s fastest-growing food-producing sector, and it’s going to play a crucial role in helping to feed a planet with an ever-growing population. The practises within the industry such as intensive fish farming have often been seen as problematic, which presents a necessity for R&D to develop effective solutions to divert the industry towards a healthier future. In 2021 the UK government rolled out the Seafood fund – a £100million fund aimed at supporting the sector’s long-term future and sustainability. Many UK companies will have benefitted from the funding in supporting their R&D, which has fuelled the importance of the tax relief scheme in the sector. Innovation that has arisen from the funding and are eligible for tax relief include:
- Development of biodegradable nets and traps
- Engineering of cheaper, lower maintenance fish farms, that maximise yield and welfare
- Plant-based solutions for alternative fish feed
- Development of acoustic deterrents, ‘pingers’ to prevent bycatch of dolphins and whales
R&D within Electrical Engineering
Companies that specialize in electrical engineering provide several services, including the designing, testing, building, and delivering of electronic parts and assemblies. These services are in huge demand, with specialized electrical engineering being required in the production of goods and services that are used by billions of people around the globe every day. Within the UK, funding towards innovative projects have been aimed at driving the electric revolution, specifically from bodies such as UK Research and Innovation. R&D within electrical engineering has led to industry advancement in areas such as:
- Engineering of electrical components to become produced through automation
- Designing of electrical systems to be proactively monitored to stop potential faults
- Development of greener electrical solutions within environmentally harmful industries
How R&D tax credits can help your company engineer innovation
You may be thinking that the engineering within your company could be eligible for R&D tax credits, but curious about what activities would qualify and what the benefits of the scheme are.
Varying forms of expenditure that has in some way contributed to the project will be classed as eligible for tax relief. Here are some examples in relation to engineering:
- Prototypes created in order to test the solutions being developed in the project – such as the building and testing of new coatings within chemical engineering
- Direct R&D staff costs, such as a head engineer of a construction firm. This includes salaries and wages, pension contributions, employer insurance contributions, and reimbursed business expenses to all staff used for R&D projects.
- Any required training done of the staff that have directly supported an R&D project.
- Activities essential to the undertaking of R&D. For example, leasing laboratories and equipment may be claimed for.
Whenever your company is considering starting a new project which involves R&D to achieve your goal, the ability to receive R&D tax credits should be a vital aspect of the project. Being financially rewarded for the implementation of R&D within your company is something that can greatly benefit both smaller and larger companies. Not only can innovative projects become more affordable, but the tax credits could be used in a variety of ways that can advance your company towards a brighter future.
The next step
Our team at Kirby and Haslam are specialists when it comes to R&D tax relief. If you feel like your company could be eligible for R&D tax credits, then don’t hesitate to enquire – our team of experts will help you along every stage in the process.