4 minute read • published in partnership with Visiativ
Insight: Positive outlook and funding opportunities for UK manufacturers despite ongoing challenges
The recently released Make UK’s Q1 Manufacturing Outlook shows a positive and optimistic outlook among UK manufacturers with growing confidence and investment intentions, order books and output. Sandy Findlay from Visiativ looks at how manufacturers can take advantage of the positive outlook.
The latest Manufacturing Outlook report is evidence that, despite ongoing challenges, manufacturers are maintaining a positive attitude towards future opportunities and conditions. If you haven’t read the report yet, it is an encouraging read that should boost confidence for everyone involved in UK manufacturing for the coming year.
Despite this air of optimism, the report does warn that there are a number of areas that manufacturers need to think about in order to maintain stability. One key concern is managing short-term cashflow, ensuring liquidity, and freeing up funds to support ongoing investment plans.
So, what can you do to free up funds?
In the short-term, companies can improve their liquidity by managing their debtor book efficiently and avoid unnecessary extension of customer payment terms.
Another way to improve liquidity is by expediting the receipt of cash from R&D tax credit payments. Although HMRC has historically paid tax credit claims promptly, settlement times have been gradually increasing in the past two years, similar to debtor payment delays. Fortunately, help is at hand and there are lenders available now who offer cash advances secured against a company’s R&D tax credit claim.
Additionally, it is crucial for companies dependent on tax credits to assess whether they qualify as an “R&D intensive SME.” Recent changes in the R&D tax credits legislation offer a higher rate of relief to companies that spend over 40% of their expenditure on R&D activities. This results in a tax credit of 27p per £1 spent, compared to the standard SME credit rate of 18.6p in the £1. This can substantially boost available funds for SMEs relying on R&D cash credits.
Make sure everything is as it should be…
Even if a company is in profit and claiming R&D relief, there is more reason than ever before to make sure they are maximising the value of the benefit in a robust, compliant claim. Following the significant reduction in relief rates implemented in April, it is essential for every company to ensure that they effectively utilise the available schemes. Conducting a confidential claim audit can identify areas where you could potentially enhance the value of R&D tax relief benefits and highlight ways of minimising the risk of overclaiming.
Remember Capital Allowances!
Another tax relief which many companies are failing to fully exploit is Capital Allowances. The super-enhancement ended in March, but there’s still an opportunity for companies to claim relief on 130% of capital investments made between 1 April 2021 and 31 March 2023. Starting from 1 April 2023 until 21 March 2026, the government introduced full first-year expensing for general pool plant and machinery, meaning you can now claim relief on 100% of the investment in plant and machinery in the year of purchase. This allowance is in addition to the £1.0 million Annual Investment Allowance.
Explore whether you could benefit from Patent Box
Companies that have registered patents with the UK patent office or the EPO and are actively commercialising them should consider opting into the Patent Box scheme. This scheme allows companies to enjoy a reduced corporation tax rate of 10% on profits directly linked to the commercialisation of eligible patents. It’s definitely an opportunity that should not be ignored when trying to secure funding for a business.
Where to find the cash for ongoing investment
The Make UK report also highlights the challenge of securing resources for ongoing investment – necessary to maintain competitiveness and seize the opportunities which, according to the report, are likely to be presented in the coming months. For many innovative SMEs, the upfront costs to initiate an innovation project and unlock grant funding is a significant hurdle. Even if a management team is fortunate enough to receive a grant offer, they may lack the necessary funds to pay for the upfront expenses before receiving the grant. Once again, utilising cash advances secured against the grant offer can provide the necessary cash flow to get the R&D project started, trigger milestone payments, and initiate a positive cycle of growth.
We can help you take advantage of this positive manufacturing outlook
If you would like to find out more about getting access to any of the funding products outlined above, please contact Sandy Findlay, Partnership Director at Visiativ UK: firstname.lastname@example.org or 07807 739033