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Manufacturing businesses are under constant pressure to improve efficiency, increase yield, reduce waste, enhance sustainability, and drive product quality improvements. Valuable innovation is embedded in this activity, especially in improving production processes, integrating new technologies with legacy systems, overcoming supply chain or operational constraints, and achieving sustainability targets. As HMRC scrutiny has been increasing, it is important for manufacturers to ensure all qualifying R&D activity is being captured and evidenced correctly for robust, compliant claims.
R&D in process engineering
Qualifying R&D for UK tax purposes in a manufacturing environment often means overcoming technological challenges where the solution is not readily available or where existing knowledge cannot guarantee success. Some process engineering examples include
Increasing production yield
Reducing waste, energy use and material consumption
Improving product consistency, tolerances and quality
Enhancing process efficiency
Scaling production from pilot or laboratory environments
Developing or integrating automation and advanced control systems
Integrating new technologies into legacy systems or processes
Replacing existing raw materials with alternative materials due to rising costs
The key distinction for qualifying activity is that the work must go beyond routine optimisation or standard engineering practice, where a competent professional in the field cannot readily deduce at the outset. In manufacturing, there are numerous R&D opportunities which could occur within operational and production environments rather than dedicated R&D departments, otherwise referred to as ‘the shop floor’.
Where does R&D happen on the shop floor?
Process redesign to improve yield and reduce defects
Production teams frequently undertake projects to reduce defect rates, improve tolerances, and stabilise manufacturing outputs. These continuous improvement activities, even when seemingly small, can involve significant uncertainty, especially trialling multiple approaches, testing new system designs, and analysing performance data before identifying a viable solution.
Scaling from laboratory to full production
One of the most commonly overlooked areas of manufacturing R&D is scale-up. Manufacturers often encounter challenges relating to consistency, product quality, throughput, process stability, and equipment performance when scaling processes beyond laboratory environments. Specifically, where heat and mass transfer, reaction kinetics, mixing, residence time, tooling behaviour, control response or material properties can change materially at production scale. Achieving repeatable results at scale typically requires extensive experimentation, iterative testing, and process improvements.
Integrating new materials into existing processes
Whether driven by sustainability goals, supply chain constraints, regulatory requirements, or cost pressures, manufacturers are increasingly required to replace established materials with alternatives. Understanding how a new material behaves within existing production systems, interacts with legacy components, or affects product performance often requires extensive investigation and testing. Across our clients we have seen
- Lower-plastic or fibre-based packaging that behaves differently during forming, sealing or sterilisation
- Replacement raw materials following supplier or formulation changes
- New processing inputs for an existing product, such as recycled, bio-based or lower-carbon inputs that alter flow, cure, thermal or mechanical properties
Equipment modification and automation
As manufacturers modernise operations, many are introducing new equipment, advanced process controls, automation technologies, and digital systems. When integrating modern technologies with existing production assets, manufacturers often face challenges relating to compatibility, communication between systems, process accuracy, repeatability, and performance consistency. Significant development work may be required to ensure new and legacy systems operate together effectively while maintaining product quality and operational efficiency.
Continuous improvement programmes mask innovation
Many qualifying activities sit within Lean Manufacturing, Six Sigma, operational excellence, or continuous improvement initiatives. Because these programmes focus on incremental gains, businesses often assume they do not qualify.
However, the scale of improvement is not the determining factor, where failed trials, rejected approaches, and iterative testing all indicate that qualifying R&D has taken place. Without detailed accounts of modifications and experiments, valuable qualifying activity can remain hidden and often missed.
The financial impact of missed process engineering R&D claims
For manufacturing businesses operating across multiple production lines or sites, the financial impact of missed R&D claims can be substantial. This is particularly significant if there are R&D projects that are concurrently being trialled across multiple production lines or sites.
Additionally, any organisations can also overlook opportunities within larger capital investment programmes. While capital expenditure (CapEx) itself may not be claimable under R&D tax relief rules, significant qualifying revenue expenditure can often arise from the engineering time, testing activities, and technical problem solving required to overcome technological challenges for relevant R&D projects.
Under the merged R&D Expenditure Credit (RDEC) scheme, identifying these activities can generate meaningful financial benefits that can be reinvested into future innovation programmes, operational improvements, and strategic growth initiatives.
How can manufacturers improve R&D identification?
Manufacturing companies can take several practical steps to improve the identification and capture of qualifying activities.
- Educate in-house teams: Organise R&D knowledge-sharing workshops across multiple disciplines, including engineering and operations teams, to discuss and identify potential areas of qualifying R&D. Ensure clear guidance on the R&D definition and promote open discussions to significantly improve claim quality and ensure claim maximisation.
- Capture opportunities and evidence in real time: Introduce ways to allow teams to embed capturing potential opportunities and subsequent evidence, including trial records and technical notes, as part of their daily tasks. This is more effective than attempting to reconstruct evidence retrospectively and helps to ensure all potential opportunities are maximised.
- Promote results from historical claims: Communicate historical results company-wide to increase awareness and engagement. This also allows teams to gain an understanding of historical qualifying R&D projects and how their engagement with R&D claims helps improve the company’s performance.
Unlocking the value of operational innovation
For many manufacturers, some of the most valuable R&D activity is happening in production environments every day. Recognising and capturing these activities can unlock significant value, helping businesses reinvest in future innovation while ensuring they receive the full benefit of the work already being undertaken.
At Ayming, we understand that innovation in manufacturing extends far beyond product development. We offer tailored claim delivery approaches to ensure this suits manufacturing companies. Our teams understand the technical language of manufacturing environments and can translate complex engineering challenges into robust, HMRC-compliant claim narratives.
From identifying qualifying projects and expenditure through to claim preparation, submission support, and enquiry defence, we provide end-to-end support that helps manufacturing companies maximise available relief while maintaining compliance.
If your organisation is investing in process optimisation, production improvement, or manufacturing innovation, it may be worth taking a closer look at what qualifies as R&D.
