UK product design companies spend serious money on prototypes, testing and new materials. R&D tax relief for product design companies helps you recover part of that cost through your Corporation Tax return. We work with design-led businesses that build physical and digital products, from consumer electronics to furniture and medical devices, and we see many leaving money unclaimed simply because the rules look confusing.
Below is a simple and practical guide tailored to UK product design companies. It acts as a clear roadmap to help you prepare, structure, and submit a successful R&D tax relief claim.
Steps For Claiming R&D Tax Relief For Product Design Companies
1. Check that your projects qualify
HMRC only gives R&D tax relief where you try to achieve an advance in science or technology and tackle genuine technical uncertainty.
For product design companies, typical qualifying work might include:
- Developing a new product that uses novel materials or manufacturing methods
- Redesigning a product to meet demanding performance, strength or safety targets
- Integrating electronics, software and hardware where behaviour is hard to predict
- Creating and testing prototypes to prove a new concept will work in practice
Work that is mainly cosmetic (colour changes, styling tweaks, packaging design without technical change) usually does not qualify. Routine updates, bug fixes, and standard CAD drafting also sit outside the rules. You must be a UK company within corporation tax to claim.
2. Understand the current schemes and rates
For accounting periods beginning on or after 1 April 2024, most companies claim under the merged R&D Expenditure Credit scheme. This gives a taxable expenditure credit equal to 20% of qualifying R&D spend, which is then subject to corporation tax, giving an effective benefit of around 15–16.2% for many companies.
Loss-making, R&D-intensive SMEs (spending 30% or more of total costs on R&D) may instead claim under Enhanced R&D Intensive Support (ERIS), with a potential cash benefit of up to 27% of qualifying costs.
If your accounting periods begin before 1 April 2024, older SME and RDEC rules may still apply for those years.
3. Map your product design work into R&D projects
HMRC expects you to group work into clear “projects”. For a product design company, you might treat each of these as a project:
- New product platforms (for example, a new device family)
- Major redesigns for weight reduction, sustainability or performance
- New manufacturing processes, tooling or assembly methods
- Embedded software or firmware underpinning product performance
For each project, identify:
- The technical goal and why it counts as an advance
- The uncertainties you faced (for example, stress behaviour, thermal performance, wireless range)
- The experiments, simulations and tests you carried out
- The point at which technical uncertainty was resolved
This narrative will feed directly into the technical sections of your R&D claim for product design companies.
4. Capture the right costs from day one
Under the merged scheme, typical qualifying R&D costs for product design companies include:
- Staff costs, salaries, employer NIC, and pension for engineers, designers and technicians doing R&D work
- Externally provided workers, including agency engineers under your direction (usually 65% of cost, subject to PAYE conditions)
- Subcontractors carrying out R&D or essential testing, often restricted to UK-based work
- Consumables like materials, components and utilities consumed in prototypes and experiments
- Software, data licences and cloud computing used directly in R&D activities
For product design teams, that often means:
- Design engineer time spent on problem-solving and testing, not routine drafting
- Prototype materials and 3D printing costs that are scrapped or not sold
- Lab testing, environmental or compliance testing linked to the R&D phase
- Simulation software, FEA tools, CFD packages and related cloud costs
Keep time-records, project codes and purchase descriptions tight enough to link each cost to a specific R&D project. This is vital in case HMRC opens an enquiry. Around 20% of claims now face some form of compliance check.
5. Meet the new notification and information rules
Two extra steps now catch many companies out:
- Claim notification form
- For periods starting on or after 1 April 2023, first-time claimants and companies that have not claimed within the last three years must tell HMRC they plan to claim.
- The online notification form must be filed within six months of the end of your period of account. Missing this deadline can invalidate the R&D claim for product design companies.
- Additional information form
- Before you file your CT600, you must submit an additional information form giving project descriptions, costs by category, and contact details for the responsible staff and any advisers.
Apex Accountants helps product design companies set up an annual timetable so these steps never get missed.
6. File the claim through your Corporation Tax return
Your R&D claim is made through your Company Tax Return (CT600).
Key points:
- You normally have two years from the end of your accounting period to submit or amend a claim.
- The R&D expenditure credit figures must match the totals in your additional information form.
- The credit is shown as taxable income and then offset against your Corporation Tax bill. Any excess may be paid, set against other liabilities or carried forward, depending on your position.
Given HMRC’s increased scrutiny and recent use of data-driven risk checks, well-structured documentation is essential.
7. Avoid common mistakes in product design claims
From reviewing R&D claims across the design sector, we see the same errors:
- Treating aesthetic design work as R&D without a clear scientific or technological advance
- Including all prototype costs, even when the prototype becomes a saleable production unit
- Poor evidence of technical uncertainty; marketing language instead of engineering detail
- Missing the notification deadline or failing to submit the additional information form on time
Cleaning these points up before submission greatly reduces the risk of enquiry and protects cash flow.
How Apex Accountants Supports Product Design Companies
Apex Accountants works closely with UK product design companies to:
- Identify qualifying R&D costs for product design companies within everyday design and engineering work
- Build project narratives that use engineering language HMRC expects
- Set up simple time-tracking and cost-coding so claims are repeatable each year
- Prepare notification forms, additional information forms and CT600 entries
- Defend claims if HMRC raises detailed questions
If you want to turn your product development spend into a reliable R&D benefit, rather than a one-off “lucky claim”, talk to Apex Accountants before your next year end.
