How an R&D Tax Relief Claim Works for a Manufacturing Company

A production project has been tested against the definition and it qualifies. Everything from that point is administration, and the administration has a shape worth knowing before you start, because two of its steps are timed and one of them can close a claim that would otherwise have been perfectly good.

What follows assumes the eligibility question is settled. If it is not, settle it first, because nothing on this page improves a project that does not meet the test.

The Dates Come Before the Substance

Work out the accounting period the qualifying work falls into, and then work out the dates, before anyone starts writing anything. Take a company with a 31 March 2026 year end, a period that began on 1 April 2025 and therefore sits inside the merged scheme.

• Company tax return due: 31 March 2027, being 12 months after the end of the accounting period.
• Amendment window closes: 31 March 2028, being 12 months after that filing date. A claim made by amendment has to land inside this.
• Any claim notification deadline: during 2026, six months after the end of the period of account, so 30 September 2026 for this company.

The notification date is roughly eighteen months earlier than the amendment date. That gap is where claims die. A company that discovers in early 2028 that it should have claimed for the year to March 2026 is inside the amendment window and may still be refused, because the earlier step was missed and it cannot be taken late.

The Claim Notification Form, and Who It Catches

For accounting periods beginning on or after 1 April 2023, HMRC requires some companies to notify it in advance that a research and development claim is coming. The form is short and it is not the claim. It records the period, the company, the contact who will handle the claim and a summary of the planned work.

Companies with a recent claim history can fall outside the requirement, and the rule that decides this is drafted narrowly, by reference to when earlier claims were actually made rather than to which years they covered. It is genuinely easy to get wrong from memory. Check the current gov.uk claim notification guidance against your own filing history, in writing, and keep the answer with the working papers. Assuming exemption because "we claimed last year" is the version of this that fails.

Building the Cost Schedule Out of Payroll and the Purchase Ledger

The schedule is an accounting exercise sitting on two systems you already run.

From payroll: gross salary, employer National Insurance contributions and employer pension for the people who did the work, apportioned by the time actually spent on the qualifying project. Apportionment is the part HMRC probes. A process engineer who spent one day a week on trials for four months is a defensible fraction supported by shift records. A flat 30% of the engineering department applied across a year is not, and it invites the enquiry it deserves.

From the purchase ledger: material consumed and transformed in testing, including scrapped output from trial runs. Where trial output was sold, the proceeds come off. Software licences used directly in the work. Externally provided workers and subcontracted work go in under their own rules, which differ depending on connection between the parties and on the arrangements in place for the period, so identify those contracts early rather than at the end.

Out entirely: capital spend on plant and machinery, production overheads, rent, rates, distribution and anything to do with selling the resulting product. A new machine bought to run the process belongs in capital allowances, and that is a different computation with different rates and its own timing.

What Records a Factory Already Holds

Most manufacturers believe they have no research records and are wrong. What they lack is a folder with the word "project" on it. The evidence is scattered across systems that were running anyway.

• Trial and run logs with dates, settings and outcomes.
• Quality reports showing failure modes and rates, before and after.
• Drawings marked up with revisions and the reason for each change.
• Emails between engineers, including the ones saying an approach did not work.
• Purchase orders for trial material, and scrap records for what came off the line.
• Shift records or timesheets that support the payroll apportionment.

Preserve those rather than writing new ones. Contemporaneous material carries weight precisely because it was not written for HMRC, and a tidy narrative composed two years later with no underlying trace is the weakest position a company can be in when questions arrive.

Writing the Technical Account

The technical account explains four things, in the engineers' own terms: what was not known when the work started, why the published knowledge in the field did not answer it, what was attempted in what order and what happened, and what the field can now do that it could not before.

Failed work belongs in it. An attempt that never reached its target can still be qualifying work, and describing the failure honestly is usually more convincing than describing a success, because it shows the uncertainty was real. What does not belong is marketing language, superlatives, or a description that could apply to any factory in the sector. The account is written by whoever ran the trials, with an accountant checking that the costs attached to it match the periods described.

The Additional Information Form and the Return

The claim is made in the company tax return, the CT600, with the relevant supporting pages. Alongside it, an additional information form has to reach HMRC before or on the same day as the return. It sets out the projects, the qualifying costs by category, the contact details of the person responsible for the claim and the agent involved if there is one.

The consequence of missing it is blunt: HMRC removes the claim from the return. The return is still filed, the claim is simply not there, and by the time that surfaces the amendment window may be short. Submit the form first, keep the submission receipt, and file the return afterwards.

If HMRC Opens a Compliance Check

Checks are routine in this area, they are not an accusation, and they are handled on paper. HMRC typically asks for the technical account in more detail, the basis of the cost apportionment, and the contemporaneous records behind both. Answer with the material that already existed, name the competent professional whose knowledge sets the baseline, and be willing to withdraw part of a claim that does not hold.

A company that decided eligibility honestly before it started has very little to fear here. A company that claimed on someone else's assurance that its sector routinely qualifies has a difficult correspondence ahead, and the exposure runs beyond repaying the credit.

What the Merged Scheme Changed

For accounting periods beginning on or after 1 April 2024, the separate small company and large company schemes are replaced by a single merged scheme. It gives a Research and Development Expenditure Credit at 20% of qualifying expenditure, taxable as income, for companies of all sizes. Loss-making companies whose qualifying expenditure is at least 30% of total relevant expenditure may instead fall within Enhanced R&D Intensive Support, from the same start date.

The practical effect for a manufacturer with a year end other than 31 March is that two consecutive periods can be computed under different regimes, so the older year is not a template for the newer one. Research and development rates and thresholds have moved repeatedly since 2022. Check the current gov.uk merged scheme page for the period you are actually claiming for rather than relying on any summary, this one included.

Who Should Do This

The technical substance can only come from the people who ran the trials, and the computation has to sit with whoever prepares the company's corporation tax return, so keeping those two close is the whole trick. Contingent fees paid to a third party who identified the projects, wrote the account and never met the engineers are how a large number of the claims now under compliance check came into being.

Holloway Davies does not prepare or process research and development claims and does not act as a claim agent. This page describes the process; it is not an offer to run it. For the question that comes before any of it, our companion page sets out the four-question test for whether a production improvement qualifies at all, with the credit arithmetic worked through. If you want an ordinary second opinion on your company's corporation tax position, get in touch.