R&D Tax Relief For Aerospace Companies
UK aerospace manufacturers can recoup up to 33% of their research and development costs through R&D Tax Relief, a generous scheme that rewards companies for investing in innovation. Here’s what you need to know about R&D Tax Relief, including who is eligible, which costs qualify for relief, and how GrantTree’s experts can help you make the most of this valuable scheme.
Introduction
From the earliest biplanes to supersonic jets and treatment-carrying drones, the UK’s aerospace industry has a long, celebrated history of unleashing cutting-edge technologies that enable faster, safer, cleaner air travel.
The challenges in achieving these advances in aerodynamics, software, propulsion and material science are varied and complex. To overcome them, innovating companies are required to invest large sums in design, testing, refinement, and production.
Helpfully, many of these investments are eligible for R&D Tax Relief, a generous government subsidy that allows businesses investing in innovation to recoup up to 33% of their costs in cash credits and corporation tax reductions.
What is R&D Tax Relief?
R&D Tax Relief – also called R&D Tax Credits – is a government scheme designed to reward and de-risk innovation by allowing companies to recoup a percentage of their R&D expenditure.
In the 2021 tax year, the R&D Tax Relief programme distributed £6.6 billion in cash credits and tax reductions to nearly 90,000 businesses. This windfall helped them to conduct more development work, accelerate key hires, and achieve ambitious growth targets.
R&D Tax Relief supports companies looking to overcome scientific and technological obstacles. As a result, the scheme is perfectly suited to companies working in aerospace, a field rife with challenges and unknowns.
R&D Tax Relief is available to a wide range of companies in the aerospace industry, from multinational manufacturers to earlier-stage businesses producing components used in a larger vehicle or system.
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Which aerospace projects qualify for R&D Tax relief?
Aerospace unites a range of technological fields, from rocketry to navigation, cloud computing to AI. As a result, a wide range of aerospace-related activities qualify for R&D Tax Relief. Here are a few examples.
- Conducting research into supersonic flight, including the development of new materials, propulsion systems, and aerodynamic designs
- Conducting research into the use of renewable energy sources for aviation
- Designing and testing aircraft designs to improve performance and fuel efficiency
- Designing new manufacturing processes
- Developing new propulsion technologies for use in electric aircraft and other alternative propulsion systems
- Developing new unmanned aerial vehicles (UAVs), including drones and other remotely piloted aircraft
- Enhancing existing systems, components and software with new properties and capabilities
- Finite element analysis and other analyses based on computer simulations
- Increasing the reliability and durability of a component with new composites and coatings
- Prototype construction and testing and developing new test procedures
- Researching the use of artificial intelligence and machine learning in aerospace operations
- Synthesising new lightweight materials and structures for use in aircraft and spacecraft
Which costs are eligible for R&D Tax Relief?
In total, ten types of development-related costs are eligible for R&D Tax Relief. You can read the full list here in our dedicated blog. Here are some examples of claimable costs that are specific to the research and development activity conducted by aerospace companies.
Staff Costs
Salaries, wages, pension contributions, and national insurance contributions for staff directly involved in your R&D, including:
- Aerodynamists
- Aerospace, Chemical, Mechanical and Systems Engineers
- CAD Designers
- Composite Technicians
- IT Architects
- Maintenance Technicians
- Materials scientists
- Project Managers
- Quality Control Managers and Inspectors
- Software Developers
- Test Pilots
Prototypes
Certain costs associated with the design and construction of a prototype needed to test the R&D you’re undertaking are eligible for relief. However, if you are planning to sell your prototype, HMRC will classify it as a first-of-class product, and you will only be able to claim relief on costs associated with work to overcome a scientific or technological uncertainty.
Consumables
Consumables are resources that are ‘used up’ in the R&D process. This includes parts, raw materials, chemicals like solvents and lubricants, fuel, gases and certain utilities including water, light and heating. Utilities are usually apportioned based on how much of the cost is attributable to R&D and not routine aspects of the business.
Aerospace subcontractors and R&D Tax Relief
In the aerospace industry, it’s common for larger manufacturers to commission smaller companies to develop products and solutions that will form part of bigger vehicles and systems.
Oftentimes, the subcontractor will supply their customer on a per-unit basis. Under this arrangement, the subcontractor will be barring the financial and technical risk of the R&D and, therefore, may be eligible to claim R&D Tax Relief.
The laws governing relief for subcontractors are fairly complicated. If you have been subcontracted by a larger aerospace company and want to understand whether you’re eligible for R&D Tax Relief, our experts would be happy to help you. Just get in touch.
Free Guide: R&D Tax Relief for Aerospace Companies
R&D Tax Relief is a valuable and relatively-accessible source of funding for aerospace companies. However, the scheme is also filled with grey areas and nuances, which can easily land an eligible company with a lengthy enquiry.
To help you navigate these potential pitfalls, GrantTree’s R&D Tax specialists have written this detailed guide to building a compliant claim. Download your free copy below.
Looking for help? GrantTree is here for you.
The R&D Tax Relief scheme has changed dramatically over the last two years. The amount of relief available has fluctuated, the list of eligible costs has grown, and the claims process is about to become significantly more demanding.
If you want to make the most of these changes while protecting your aerospace company from a damaging, time-consuming HMRC enquiry, GrantTree’s R&D Tax Relief experts are here for you.
We have helped more than 2000 companies access over £350 million in R&D Tax Relief over the last 12 years, including many involved in developing vehicles and systems in the aerospace sector.
Combining leading, sector-specific technical expertise with decades of cumulative tax experience, our R&D Tax Relief teams will ensure you access your full legal entitlement of relief while saving you hours of effort.
Case Study: PPSGB
What Our Clients Say
GrantTree’s service was fast and responsive. They identified costs that we missed and increased our claim size. We’re happy customers and recommend working with them.
We’ve worked with GrantTree for a few years now. They take the pain and complexity out of claiming R&D tax credits so we can focus on developing our product.
Being an environmental engineering company, we are very specialised; GrantTree used their extensive expertise to identify qualifying work and maximise what we could claim back.
GrantTree made the whole process of applying for R&D Tax Credits completely painless. Their extensive experience is invaluable in navigating the complex rules.
GrantTree has been a joy to work with! They really care about our product and what we do. Would highly recommend!
We were using a standard accounting firm, but they didn't understand our vision. Virtual reality is quite a new technology and not everybody gets it.
GrantTree was the perfect tax credits partner. They really understood our technology and R&D, which helped us claim for every penny possible.
Grant Tree's approach to R&D Tax Relief claims is a breath of fresh air. They take the weight off your shoulders, and do all the work of preparing the claim.
The money they have successfully claimed for us has played an important part in funding the growth of the business in a range of ways.
GrantTree has been great in helping us get R&D Tax Credits. Having never done this before, we were astounded by how easy and clear they made the entire process.
GrantTree helped us understand the concept and provided us with lots of guidance. I would be more than happy to recommend GrantTree to anyone.
The team were second to none in making the process as easy as possible and exceedingly helpful along every step. We look forward to working with them next year.
Without GrantTree, we would not have filed at all, and even if we had filed, we would not have maximised our claim in the way they managed.
We were previously working with another specialist when GrantTree approached us and were able to save us more than £10k in forecasted fees.
The value we have gained from GrantTree is significant to our business and helps us to invest appropriately in R&D. I would highly recommend the service to any company.
Expert support for your claim
Looking for help on your upcoming R&D Tax Relief claim? GrantTree’s specialists are standing by. Just drop us a line and we’ll be back in touch shortly.
