Firms advised to seek R&D relief

MANUFACTURERS in the region are being encouraged to take a fresh look at R&D tax relief schemes by accountancy firm PwC.

From April 2013, the Government is planning to introduce a new ‘above the line’ R&D tax credit that will be available to larger companies (plus 500 employees) regardless of whether they are making a profit or loss.

The proposals are currently subject to a wider consultation and views from businesses are being sought by 29 June 2012.

For some manufacturing businesses that have been used to making a loss, such as those investing in the research and development of emerging technologies that have not yet made it to market, R&D tax relief may not have been claimed previously.

Paul Harris, R&D tax expert at PwC in the Midlands, said: “Larger firms in the region are big spenders when it comes to R&D and they deserve to be able to take the credit for their investment. From April next year, it is proposed that even if they are making a loss they will be able to claim a repayable tax credit calculated by placing the sum invested in R&D above the line.

“For tax purposes, this means their R&D spend can increase the company’s profits before tax.

“For those investing large sums in R&D each year, the tax credit repaid to the business could be significant and this is likely to encourage some engineering teams to consider claiming R&D tax relief for the first time.”

Larger manufacturing businesses are not the only ones to benefit from the recently announced changes to R&D tax relief. Small and medium-sized businesses (up to 500 employees) can now benefit from tax relief of 125% on their R&D spend and the limit imposed on the level of relief payable, based on the company’s PAYE/NI contributions, has been removed altogether.

Harris added: “This is good news for smaller, knowledge-based businesses that typically have a lower headcount but still invest significant sums in R&D. These businesses are creating jobs for the future and can now literally take full credit for their investment.”