Claiming R&D Tax Relief for Product Design Companies

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 R&D tax relief 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:

• Eligible staff costs for R&D tax relief, including salaries, employer NIC and pension contributions for engineers, designers and technicians carrying out qualifying 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:

1. 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.
2. 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). Our corporation tax services can coordinate the R&D claim with your wider corporation tax position, helping ensure the credit, qualifying expenditure and CT600 figures are reported consistently. 

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. For a broader overview of eligibility, qualifying costs and the claims process, our complete guide to R&D tax relief explains the key steps businesses should consider before submitting a claim. 

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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.

Faqs

Q: Can product design work qualify for R&D tax relief?

 A: Yes, when it involves overcoming scientific or technological uncertainty with new materials, novel functional designs, improved reliability or manufacturability. Pure aesthetic design does not qualify, but functional development around it usually does.

 Q: What design costs count towards a claim?

 A: Staff time of designers and engineers, software used in development, materials consumed in prototyping, and subcontracted R&D within qualifying projects all documented project by project. 

Q: How much can a design company claim? 

A: Under the post-April 2024 merged R&D scheme, companies receive a 20% above-the-line taxable expenditure credit on qualifying spend (a net benefit of around 15% for a company paying the 25% corporation tax rate). R&D-intensive SMEs meeting the intensity threshold can access an enhanced credit rate. Actual figures depend on qualifying spend; we assess that from your project records.