Business Finance: Peter Harrup on how the Autumn Statement will help R&D

Peter Harrup of BDO

Peter Harrup of BDO - Credit: Archant

The manufacturing sector is set to start 2015 on solid ground, with strong outputs and orders during 2014 continuing to feed through to increased investment for the next 12 months.

This has had a particularly positive impact on the region’s labour market. Recruitment intentions for the first quarter of the year are more positive in East Anglia than any other UK region, with a net 25% of local frims expecting to ramp up their recruitment plans in Q1.

Appetite for international expansion remains rife too. According to our most recent research, East Anglia is one of the UK’s most valuable exporting regions for medium-sized businesses, with total sales abroad totalling £6.3bn each year and £1.2bn of that coming from the manufacturing sector.

Manufacturers are also looking to invest in their products and processes to make them more competitive in domestic and international markets. There was good news in the Autumn Statement earlier this month when the Chancellor announced the value of both R&D tax reliefs and credit schemes for small and medium-sized businesses and large companies will be increased from 1 April 2015.

The rate of relief for qualifying expenditure incurred under the above-the-line tax credit available to large companies will increase from 10% to 11%. Relief for qualifying expenditure for SMEs firms will increase from 225% to 230%. There was also further assurance for smaller companies that are making their first R&D claims.

The announcements were especially welcomed in light of the changes that will inevitably be made to one of the Government’s flagship tax policies, the Patent Box, which some believe will have a detrimental effect on UK tax competitiveness. We will have to wait until next year to hear the details but it is expected that in June 2016 tax advantages to patents will only be available if the underlying R&D work has been carried out in the UK.

According to government statistics earlier this year, approximately 10% of all R&D claims are made by companies in the East of England resulting in around £150 million of tax support for the region. We want 2015 to be the year that more businesses recognise their R&D potential and think this figure should be even higher.

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Tax incentives are in place to support businesses, but many are put off by what seem like ever changing rules and complex red tape. If you have one new year resolution, let it be to seek advice on R&D. By planning your investments, you can not only maximise tax reliefs but reduce costs and ultimately help your business thrive for the long term.

: : Peter Harrup is a partner at the Ipswich office of BDO LLP.

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