Improve engineers with penalty (6)
I believe the answer is:
refine
'improve' is the definition.
(I know that refine is a kind of improve)
'engineers with penalty' is the wordplay.
'engineers' becomes 're' (Royal Engineers).
'with' says to put letters next to each other.
'penalty' becomes 'fine' (a financial penalty).
're'+'fine'='REFINE'
(Other definitions for refine that I've seen before include "Make pure" , "Purify or make more cultured" , "Purify or improve" , "Filter or process as with oil" , "Remove impurities from (eg, metals)" .)