Despite regular protestations to the contrary from many business ‘experts’ over the years, the North East still retains a very active and diverse manufacturing sector.
Whilst everything in the economic garden could, of course, be rosier for them, and for all of us, there are still a wide range of companies right across the region that are enjoying healthy order books based on the development and manufacture of industry-leading products that are sold in markets right around the world.
Staying ahead of competitors is clearly crucial to their continuing commercial success, and when manufacturing businesses, or indeed businesses of any kind, are looking at finding the finance they need to expand and development, they need to consider every option available to them
One of the key areas to consider is corporation tax, and specifically whether companies are making the most of their allowance around research and development activities.
R&D taxation allowances have been a regular feature of Budget speeches over recent years, but despite this, many management teams are simply not aware of the reliefs available, or that the relief is not just wrapped up in a form of scientific discovery, but applies to a wide range of manufacturing activities and related staff costs.
As of the start of this financial year, SMEs can now claim 225% tax relief of qualifying research and development costs, a figure that could make a massive and immediate difference to the financial position of the relevant company, and it’s obviously crucial that this potentially vital area of working capital is not ignored by the companies that approach us for investment.
It’s easy to take too narrow a definition of the term “R&D,” which doesn’t have to relate to ground-breaking new technologies that are going to change the face of an industry forever.
Experience tells that most manufacturing businesses will be undertaking development of some kind and will hence have qualifying expenditure, and unusually, HMRC is being very pro-active with this scheme.
At the present time, the UK has the lowest take-up of this scheme in the whole of Europe, and north east England has the lowest take up rate of any region within it.
It’s clear that there’s work to be done to make the most of the opportunities that this scheme offers, but the rewards for doing so could make a huge difference to businesses’ long-term development and job creation prospects.
Stephen Slater is a director at RMT Accountants & Business Advisors in Newcastle