R&D Tax Relief for Motorsport Teams and Their Supply Chain
Motorsport moves quickly, and much of the engineering behind it happens a long way from the pit lane: in composite shops, machine shops, electronics firms, simulation houses and test facilities. We help teams and the businesses that supply them work out which projects meet HMRC's definition of R&D, who is entitled to claim, and how to evidence it properly.
Lexmore is a member of the Motorsport Industry Association (MIA).
When can motorsport work qualify?
Performance gains are not the test. Qualifying R&D must seek an advance in science or technology, and the company must face technological uncertainty: a point where a competent professional in the field could not readily work out whether something was possible or how to achieve it.
- The advance must be relative to the field as a whole, not just new to your business or your team.
- The uncertainty must be technological. Uncertainty about lap time, race results or commercial success is not enough on its own.
- A commercial purpose does not disqualify a project. Most motorsport R&D is done to win, sell or supply, and that is fine.
- A project does not have to succeed, or reach the car, to qualify.
Projects that may contain qualifying R&D
These examples show where qualifying work can arise in motorsport and its supply chain. They do not mean a project, or every cost within it, will qualify.
Composites and lightweight structures
May qualify: developing a new layup, resin system or cure process to meet stiffness, weight and crash targets that existing methods could not achieve together.
Usually routine: producing a known part to an established layup schedule, or a cosmetic change to a panel.
Aerodynamics, CFD and wind tunnel correlation
May qualify: developing new modelling methods or correlation techniques where the relationship between simulation and real-world behaviour was not understood.
Usually routine: running established CFD workflows to choose between design options using known methods.
Powertrain, hybrid systems and alternative fuels
May qualify: resolving combustion, thermal or durability problems when adapting an engine to a sustainable fuel, or developing energy recovery and battery systems that operate beyond known limits.
Usually routine: calibration and mapping using standard tools and known procedures.
Electronics, data systems and embedded software
May qualify: creating telemetry, sensing or control software that overcomes limits in bandwidth, latency, accuracy or reliability that could not be readily resolved.
Usually routine: configuring off-the-shelf data loggers or building dashboards on existing platforms.
Vehicle dynamics, simulation and driver-in-the-loop
May qualify: developing new vehicle or tyre models, or simulator methods, where existing models could not predict behaviour reliably.
Usually routine: using an existing simulator to prepare drivers or set up for a circuit.
Precision machining, additive manufacturing and tooling
May qualify: developing new manufacturing methods, for example additive processes for high-temperature alloys, where achievable tolerances, material properties or repeatability were uncertain.
Usually routine: manufacturing parts to a customer's drawings using established processes.
Transfer to automotive, aerospace, defence and marine
May qualify: adapting motorsport technology for another sector where new technical problems arise, such as durability over far longer service lives or scaling to production volumes.
Usually routine: rebadging or repackaging an existing product for a new market.
Who claims: the team or the supplier?
This is the most important question in the motorsport supply chain, and it is often answered by the contract.
For accounting periods starting on or after 1 April 2024, the general rule is that the company that decides to undertake the R&D is the one that can claim. Where a customer contracts out work and intended or contemplated that R&D would be done, the customer normally claims. A supplier can usually claim only where it took the initiative itself, for example by developing a new process or product at its own risk, or carrying out scoping work before a contract was agreed.
HMRC looks at the contract terms and the surrounding circumstances, including:
- who owns the resulting intellectual property
- who carries the financial and technical risk
- how much freedom the supplier has to decide its approach
- whether the customer is buying a finished part or paying for the R&D itself
Two companies cannot both claim for the same R&D. Where a team and a supplier agree in writing which of them will claim, HMRC will usually treat that agreement as persuasive. We review contracts, purchase orders and technical briefs with you before any claim is prepared, and we can help you set clear terms for future work.
What normally does not qualify?
- Building, assembling or maintaining cars using known methods
- Set-up changes and circuit-specific tuning based on established practice
- Manufacturing to drawings supplied by a customer
- Adopting a technique that is new to your business but already known in the industry
- Routine testing, homologation, scrutineering and certification
- Work to comply with technical regulations, where no technological uncertainty is involved
- Cost reduction, scheduling and production problems
- Styling, livery and cosmetic work
Difficulty, tight deadlines, high cost and the pressure of a race calendar do not on their own make work R&D.
What evidence supports a claim?
Strong claims show what was known at the start, what advance was sought, why the route was not readily deducible, and how the uncertainty was worked through. Motorsport businesses usually hold much of this already:
- design briefs, specifications and technical targets
- CAD revision history and change records
- simulation, CFD and correlation reports
- test plans, rig and dyno data, and track test reports
- failure analyses and records of approaches that did not work
- engineering meeting notes and design reviews
- contracts, purchase orders and statements of work
- timesheets and cost records
Which costs may be included?
Restrictions on overseas contractors and externally provided workers apply to periods starting on or after 1 April 2024. This matters where work such as wind tunnel or test programmes is carried out abroad.
Production costs, capital items, land, and patent or trademark costs are excluded. Test rigs, dynos, jigs and fixtures are generally capital, so they fall outside R&D expenditure, although Research and Development Allowances may be available.
See the qualifying R&D costs guideR&D Tax Relief Calculator
Fill in the boxes, your estimate updates as you type.
For financial periods starting on or after 1 April 2024
Tell us about your business
Enter your best estimate of spend on qualifying R&D activity. This is not your total development, engineering or project budget.
Qualifying spend covers only the staff time, contracted-out R&D, externally provided workers, consumables, software, data licence and cloud costs attributable to work that sought a scientific or technological advance. Most companies overestimate this figure before a technical review, so treat whatever this produces as an upper bound rather than a target.
For periods beginning on or after 1 April 2024, overseas contracted-out R&D and externally provided worker costs are generally restricted. Limited exceptions apply where necessary conditions cannot reasonably be replicated in the UK; lower costs or overseas worker availability alone are not enough.
How Lexmore helps
1. Assess the technical position
We talk to your engineers to identify which projects contain qualifying R&D and which do not.
2. Review the contracts
We establish whether you or your customer is entitled to claim before any work on the claim begins.
3. Establish the evidence
We work with your existing technical records rather than asking you to create new ones after the event.
4. Review the expenditure
We check costs against the rules, including subcontractor, overseas and capital restrictions.
5. Prepare the claim
We prepare the technical narrative and the Additional Information Form.
6. Provide enquiry support
If HMRC opens an enquiry, we support you through it.
Which R&D scheme applies?
Periods starting on or after 1 April 2024 generally fall under the merged scheme. Some loss-making, R&D-intensive SMEs may qualify for Enhanced R&D Intensive Support instead.
Find out which R&D scheme applies.Could Patent Box also apply?
Many motorsport businesses protect their know-how through confidentiality rather than patents. Where you do hold patents, or an exclusive licence, on products you sell or license to teams, manufacturers or other sectors, Patent Box may reduce the Corporation Tax rate on relevant profits to an effective 10%. Elections have time limits.
Explore Patent Box tax relief.R&D claim deadlines
Claims must generally be made within two years of the end of the accounting period. Some companies must also notify HMRC within six months of the period end, including many first-time claimants.
See how and when to make an R&D claim.Frequently asked questions
We supply a race team. Can we claim, or can they?
It depends on the contract and who decided the R&D should be undertaken. Where the team intended or contemplated R&D when placing the work, it will normally claim. Where you developed something on your own initiative, you may be able to claim. We review the contract with you first.
Our development work never made it onto the car. Does it still count?
It can. A project does not need to succeed to qualify, provided a genuine advance was sought and technological uncertainty existed. Records of what did not work are often among the strongest evidence.
Is track testing R&D?
Testing can form part of an R&D project where it helps resolve a technological uncertainty. Testing to optimise set-up or confirm known performance usually does not.
We are a small team. Do we need dedicated R&D staff to claim?
No. Engineers who split their time between development and race operations can be included for the time they spend directly on qualifying R&D, supported by reasonable records.
Can we claim for our dyno, rigs or simulator?
Not as R&D expenditure, because these are normally capital items. Research and Development Allowances may apply, and we can review this alongside your claim.
Discuss your motorsport projects
Whether you run a team, supply one, or are taking motorsport technology into other sectors, we will assess which projects meet the definition of R&D, who is entitled to claim, and what evidence supports it. If the work does not meet the test, we will tell you plainly.
Where to find us
We attend the main UK motorsport engineering shows, including Motorsport Technology Expo UK and MIA CTS. If you would like to arrange a meeting at a future event, get in touch.