Sector expertise
R&D Tax Credits for Engineering Companies
Engineering businesses are often solving complex technical problems around performance, efficiency, safety, materials, manufacturing, automation, testing and systems integration. Where your company is developing new products, improving processes, building prototypes or overcoming uncertainty in how a system, component or process performs, you may be carrying out qualifying R&D. InnoFund helps engineering companies identify eligible activity, prepare compliant R&D Tax Credit claims and protect future innovation funding opportunities.
Sector innovation
Innovation in Engineering
Engineering innovation can take place across product design, prototyping, process development, materials, manufacturing, software, automation, energy efficiency, safety, scale-up and complex systems integration. Qualifying R&D may arise where a business is not simply applying known engineering methods, but is developing or adapting technology because the outcome cannot be readily predicted by competent professionals in the field.
This includes work across:
- Product design and prototyping
- Process improvement
- Materials innovation
- Mechanical engineering
- Electrical engineering
- Systems engineering
- Automation and robotics
- AI and IoT integration
- Energy efficiency
- Safety and compliance systems
- Scale-up and testing
- Manufacturing optimisation
Engineering R&D is often found in the practical detail of testing, iteration, tolerances, performance limits and systems behaviour, especially where known methods do not deliver the required outcome.
A note from Simba Mareverwa
Engineering R&D Claims Need to Explain the Technical Problem Clearly
Engineering claims can be strong, but they must be built around the right evidence. A project may involve a new product, improved process, better component or more efficient system, but HMRC will want to understand the specific technical uncertainty that had to be resolved.
That uncertainty may sit in performance, durability, tolerances, materials, system behaviour, manufacturability, automation, software integration, safety, energy use, reliability or scale-up. A compliant claim needs to explain what the business was trying to advance, why existing engineering knowledge was not enough, and what testing, design iteration or development work was carried out.
Simba Mareverwa, InnoFund's Head of Compliance and Tax Disputes, helps ensure engineering R&D claims are reviewed with compliance at the centre. His focus is making sure claims are not built around broad claims of innovation or project complexity, but around clear technical evidence, eligible activity, competent professional input and defensible methodology.
Simba Mareverwa
Head of Tax Compliance & HMRC Disputes
- 20+ years in corporation tax compliance, including leadership of HMRC disputes.
- Extensive experience defending UK R&D Tax Credit claims under enquiry.
- Patent Box claim and enquiry experience dating from the scheme’s introduction.
Client experience
Engineering Companies Recommend InnoFund
Practical support from a multidisciplinary team that understands both the technical work and the claim.
Clear boundaries
Not Every Engineering Project Qualifies for R&D Tax Credits.
Not every engineering project, prototype or process improvement will qualify for R&D Tax Credits. The key question is whether the business faced scientific or technological uncertainty and carried out systematic work to resolve it.
Examples of work that may not qualify include:
- Routine engineering work
- Standard product customisation
- Normal CAD modelling
- Routine manufacturing changes
- Basic process optimisation
- Off-the-shelf software setup
- Standard quality control
- Routine compliance testing
- Commercial project management
- General troubleshooting
- Replication of known designs
- Work after uncertainty is resolved
Engineering projects often contain a mixture of qualifying and non-qualifying activity. InnoFund helps separate routine engineering from genuine R&D so the claim is accurate, compliant and defensible.
Eligible expenditure
Eligible R&D Costs for Engineering Businesses
Engineering businesses may be able to claim relief on qualifying costs linked to eligible R&D projects, including:
- Engineering staff time
- Design and technical staff time
- Technical director time
- Employer NIC and pension costs
- Subcontracted R&D, where eligible
- Externally provided workers
- Software used for modelling or testing
- Cloud computing and data costs
- Prototype materials and components
- Testing and validation costs
- Consumables used in R&D
- Trial production costs, where eligible
The treatment of prototype materials, trial production, subcontracted work, client-funded projects, software and externally provided workers can be particularly important in engineering R&D claims.
InnoFund helps identify which costs are eligible and ensures the claim is built around the qualifying technical work, not just the wider commercial project.
Evidence & scrutiny
HMRC Risk Areas for Engineering R&D Claims
HMRC is applying greater scrutiny to R&D Tax Credit claims, including claims from engineering and manufacturing businesses. A strong claim must explain the technical uncertainty clearly and show why the work went beyond routine engineering or commercial product development.
Common risk areas include:
- Claiming project complexity as R&D
- Weak technical uncertainty explanation
- No clear baseline of existing knowledge
- Overclaiming routine engineering work
- Treating all prototyping as qualifying
- Incorrect subcontractor treatment
- Claiming client-funded work incorrectly
- Poor records of testing or iteration
- No competent professional input
- Failing to separate qualifying and non-qualifying activity
- Claiming standard compliance work
- Unclear project boundaries
InnoFund helps engineering companies prepare claims that are clear, compliant and evidence-led. We focus on the technical work behind the project, the uncertainty faced, the process followed and the costs directly connected to qualifying activity.
Your next step
Don't guess. Know for sure.
Got a project you want to discuss? InnoFund helps separate routine delivery from genuine R&D so that claims are accurate, compliant and properly evidenced. Speak to our innovation funding experts today.
- 30 minutes
- Expert guidance
- Commitment free
