Manufacturers missing out on lucrative tax relief rewards for innovation

As the third largest sector in the UK’s economy, the manufacturing industry makes a substantial contribution to the UK’s technological growth. Haines Watts looks at the latest figures from the Office for National Statistics on manufacturing sector spending.

According to the Office for National Statistics, the manufacturing sector spent £15.64bn on innovation. And so, the British government recognises the valuable efforts made by manufacturers by offering financial rewards.

One such reward is the R&D tax credits scheme – an incentive available to UK Limited companies which encourages investment in innovation. R&D tax credits can reduce a company’s tax liability or if a company is not in profit, it can provide a payable cash refund.

Companies just need to prove they’re solving problems, making improvements to processes and overcoming technological/scientific uncertainties to be eligible for the relief.

 

Manufacturing businesses in the UK received almost £1bn of R&D tax relief funding in 2016/17 alone.

Furthermore, the Industrial Strategy Fund has provided extra R&D funding as part of a £4.7bn government innovation drive to raise productivity and earning power in the UK.

This additional funding has arrived at the perfect time as the global manufacturing industry is rapidly advancing thanks to the emergence of new technology, such as artificial intelligence, robotics and automation.

Over a quarter of the 39,700 R&D tax relief claims from 2016/17 came from the manufacturing industry.

Around 11,000 businesses in the manufacturing sector made a claim resulting in SMEs receiving an average sum of £61,514 and larger companies gaining an average amount of £348,916.

These amounts are certainly not to be sniffed at and can really help manufacturers to reinvest in further innovation in order to improve their products and services and expand.

Yet, unbelievably, a huge sector of the industry is still failing to make the most of this lucrative tax relief.

Part of the reason that many manufacturers are missing out is that they are simply unaware of the tax relief, they falsely believe they won’t be eligible or are simply bewildered by the complicated claims process.

But with the impending threat of Brexit and an uncertain economic future for the UK, most manufacturers could benefit from a little financial support. And with the government continuing to rally round the industry and help British businesses to compete in the global arena, it’s the perfect time to find out if you’re undertaking activities that are eligible for a successful claim.

As Associate Partner of Haines Watts R&D North West Ltd, Terry Cheesman, is on a mission to educate the manufacturing industry in the potential of R&D tax credit, and how it can enable companies to progress, innovate and prosper.

Terry and his team of R&D specialists share their extensive knowledge of tax relief, working with progressive companies throughout the UK to fully maximise their R&D tax relief claims and help them grow.

Haines Watts R&D NW recently secured a six-figure sum in tax relief for one business, with its biggest claim of £1.3 million tax savings.

Terry revealed: “In the last nine months of trading, we’ve secured average tax savings of £57,000 for companies or £114,000 for two years back to back -– who doesn’t need that?

The tax relief manufacturers are securing

Examples of R&D claims Haines Watts R&D North West Ltd has helped to secure for manufacturing companies in the last year include:

• Screw & conveyor manufacturer: turnover £1.8m, headcount 23, tax savings £29,000

• Loss-making commercial door manufacturer: turnover £7.4m, headcount 45, payable tax credit £93,000

• Specialist automotive air-brake system manufacturer and wholesaler: £19m turnover, headcount 55, tax savings £106,000

• Two company group: design, manufacture and hire of generator solutions (ranging from 6 – 2,250kVA): turnover £35m, headcount 236 – repayment of £254,000 tax paid and a payable credit £312,000, total tax savings of £566,000.

Terry concluded: “R&D is a real game changer – providing much-needed cash for businesses, which helps to generate jobs, innovate, grow and take the risk out of business decisions – they can start to work towards their ‘Holy Grail’ projects.”

To find out more email Terry Cheesman via tcheesman2@hwca.com or call 0161 926 8558 or 0151 227 3463.