A recent study carried out by innovation specialist Michael Price Associates (MPA) has found that 21% of engineering firms are failing to take advantage of the government’s R&D Tax Credit scheme, which allows companies to claim back up to 33p for every £1 spent on R&D activity.
On average, engineering companies invest £386,000 a year on R&D activity, meaning they are potentially able to claim £100,360 in funding. With over 100,000 UK engineering firms in the UK, this could mean approximately £10.2 billion is going unclaimed each year.
There are a variety of reasons for not claiming the funding, but the study found the most common response given by engineers is that they don’t believe their company is eligible (10%).
However, the research revealed that many engineering companies probably qualify without realising. Some examples of indicative qualifying activities include your company developing new processes to improve efficiency, quality or performance, overcoming unplanned technical difficulties, or creating bespoke client solutions.
According to the study, two-thirds (67%) of workers think that their firms are ‘innovation active’, which is the most accurate indicator that a company is eligible for the R&D Tax Credit scheme. Despite this, only a third (37%) say that their company is claiming the available funding.
Another barrier blocking engineers from claiming is a lack of awareness about the initiative. Nearly a quarter (24%) of the surveyed engineers who aren’t claiming admitted that they didn’t even know the scheme exists. Even among those who think they are innovation active, 7% said that they were completely unaware of R&D tax credits.
While many are yet to take advantage of the scheme, engineering companies in the UK are planning to invest heavily in research and development. Over the next year, more than 22% of businesses in the UK are planning on spending more than £1 million on innovative projects.
“Engineering companies in the UK are respected all over the world for their quality and innovation, but a worryingly low number of them are claiming the R&D funding they are entitled to,” said Nigel Urquhart, senior technical analyst at MPA.
“Our research has highlighted that more work needs to be done to raise awareness of the R&D Tax Credit scheme, as these innovative companies could save themselves hundreds of thousands of pounds. This money could then be reinvested to fund further innovation, which would ensure UK engineering stays at the forefront of the industry,” he said.