United Kingdom (Engineering Council CEng / IEng): Merged RDEC R&D Tax Relief (20%), UK CAD VAR Pricing & Off-Payroll (IR35) Engineering Rates

01CEng and IEng are titles, not licences to practise

The Engineering Council holds the UK register of professional engineers and sets the competence standard, UK-SPEC (the UK Standard for Professional Engineering Competence and Commitment). Engineers register through a licensed professional engineering institution, such as the IMechE, ICE, IStructE or IET, at one of these levels:

• CEng (Chartered Engineer)
• IEng (Incorporated Engineer)
• EngTech (Engineering Technician) and ICTTech

The titles are protected. The work is generally not. In most fields, anyone may perform and sell engineering design in the UK, and there is no state-by-state seal or firm Certificate of Authorization as in the US. A US buyer who asks a UK supplier for a stamped drawing will usually get a signed calculation package or design certificate instead.

Statutory control comes from the project route, not the engineer's licence:

• Building Regulations: designs are checked by building control, either the local authority or a registered building control approver.
• Building Safety Act 2022: higher-risk buildings (generally at least 18 metres or seven storeys with at least two residential units) need Building Safety Regulator approval at defined gateways, and dutyholders must show competence.
• CDM 2015: appoints a principal designer for health and safety in design.
• Reservoirs Act 1975: one of the few places where specific engineers are statutorily appointed from panels.

What to ask a UK supplier instead of a seal: CEng registration through a named institution, professional indemnity cover and limit, and evidence of relevant competence for the route your project follows. Check the current Building Safety Regulator guidance for higher-risk work, because it is still settling.

02The merged R&D scheme from April 2024

For accounting periods beginning on or after 1 April 2024, the old SME and RDEC schemes were replaced by a merged scheme, with a separate route for R&D-intensive loss-making SMEs.

• Merged scheme: a 20% above-the-line expenditure credit on qualifying R&D spend. The credit is taxable, so a company paying the 25% main rate keeps about 15%. Where the small profits rate of 19% applies, the net is about 16.2%.
• ERIS (enhanced R&D intensive support): for loss-making SMEs whose R&D spend is at least 30% of total relevant expenditure. It gives an 86% additional deduction and a 14.5% payable credit on the surrendered loss, worth up to about 27p per pound of qualifying spend.

Worked example: £800,000 of qualifying spend

• Merged scheme, main-rate payer: £800,000 x 20% = £160,000 credit; after 25% tax, about £120,000.
• ERIS, loss-making and R&D-intensive: £800,000 x 186% = £1,488,000 enhanced loss; x 14.5% = £215,760 payable.

Process rules matter as much as rates. First-time claimants, or companies that have not claimed in the last three years, must file a claim notification within six months of the period end. Every claim needs an additional information form. Check HMRC's current guidance on both before the period closes.

03Overseas subcontracting and who gets to claim

Two changes in the merged scheme hit engineering buyers directly.

Overseas work is restricted. Contracted-out R&D and externally provided workers generally qualify only if the work happens in the UK. The exceptions are narrow: conditions needed for the research that are not present in the UK, such as geography, environment, population or a legal or regulatory requirement. Lower cost or easier hiring abroad does not qualify. A UK company sending FEA to an offshore bureau at $26/hr should expect that spend to fall out of the claim.

The decision-maker claims. Under the merged scheme, relief generally goes to the company that decides to undertake the R&D. Where a customer contracts out work it intended to be R&D, the customer claims and the contractor usually does not. Engineering consultancies and contract design houses should read their contracts with that rule in mind; check HMRC's current guidance on contracted-out R&D.

Example: a UK medtech firm spends £600,000 on in-house engineers and £250,000 on an overseas design bureau. Only the in-house spend qualifies: £600,000 x 20% = £120,000, about £90,000 net at 25%. If the bureau work had been placed with a UK subcontractor, the qualifying base would be £850,000 and the net about £127,500. The overseas route has to save more than £37,500 to come out ahead.

US groups with UK subsidiaries face a parallel US rule. Research performed outside the US is amortized over 15 years under Section 174 and excluded from Section 41 credits. Model both sides with the R&D credit and Section 174 calculator.

04Contract engineers and the off-payroll (IR35) rules

UK contract engineers commonly work through their own limited company. The off-payroll working rules decide who carries tax if the engagement looks like employment.

• Medium and large clients: since April 2021 the end client decides status and must issue a status determination statement with reasons. If the role is inside IR35, the fee payer, usually the agency, deducts income tax and employee NIC and pays employer NIC.
• Small clients: the contractor's own company decides. Size follows the Companies Act tests, whose thresholds were raised in 2025; check how they apply to your next tax year.

Worked example: what inside IR35 adds

Take an illustrative deemed payment of £500 a day for 220 days, or £110,000. Employer NIC at 15% above the £5,000 secondary threshold is (£110,000 - £5,000) x 15% = £15,750. If the paybill is large enough for the apprenticeship levy, add 0.5%. Agencies commonly pass these costs into the client rate or reduce the contractor's take-home, and contractors inside IR35 often ask for a higher day rate in return.

Buyer checks: make status decisions per role, not per supplier; keep the reasoning; and make sure the agency contract says who bears the cost if HMRC disagrees. Our staffing markup comparison covers how agency margin sits on top of these costs.

05UK CAD and PLM seat pricing

UK resellers price CAD in pounds, plus 20% VAT, which a VAT-registered business normally recovers. Engineer Aid's house benchmarks are in US dollars, so use them only as a cross-check. The conversions below use an illustrative rate of £0.78 per $1; use the rate on your quote date.

The traps are the same as in the US: renewal uplifts, bundled cloud services and floating-seat over-provisioning. At a 9.5% annual uplift, a seat that costs £2,964 today costs £2,964 x 1.095 x 1.095 = £3,554 after two renewals unless a cap is written in. Ask for a multi-year cap and benchmark two resellers before the renewal date.

UK firms buying offshore drafting face the same house benchmarks as US buyers: $14/hr for 2D and BIM, $18/hr for 3D CAD and $26/hr for FEA, plus an 18% internal QA buffer for your own engineer's checks. Two UK-specific points change the comparison. First, offshore spend usually drops out of the R&D claim, as above. Second, if drawing sets or project files contain personal data, such as names and contact details in title blocks or site logs, UK GDPR transfer rules apply; check that the contract includes an appropriate transfer mechanism.

Run named-user against Flex math with the Autodesk named-user vs Flex audit.

06UK buyer checklist

1. Ask suppliers for CEng or IEng registration and the institution, not a stamp.
2. Confirm professional indemnity cover and limit in writing.
3. For higher-risk buildings, check dutyholder competence against current Building Safety Regulator guidance.
4. File the R&D claim notification within six months of period end if you are a first-time or lapsed claimant.
5. Test ERIS eligibility at the 30% intensity threshold before defaulting to the merged scheme.
6. Keep overseas engineering spend out of the R&D claim unless a statutory exception applies.
7. Issue status determination statements per role and agree who bears an IR35 dispute.
8. Benchmark CAD renewals in GBP and secure a multi-year uplift cap.

07Run the numbers: iRC Section 41 R&D tax credit, Section 174A and contingency fee audit calculator

The same benchmarks as this sheet, with your inputs. Share link and printable brief open the full calculator page.