How could R&D tax credits and capital allowances benefit your manufacturing business?

In our latest Manufacturing video Ginni Cooper, Partner and David Hackett, Tax Director discuss Research and Development tax credits and capital allowances and what this means for a business.

For a typical SME, in terms of cost savings, R&D tax credits can attract 230% tax relief. An R&D project can develop a new process, product or service or it can improve an existing one.

What type of projects qualify for the relief?

• Any project that seeks to achieve an advance in science or technology.
• A project needs to aim to resolve scientific or technological uncertainties that cannot be easily resolved by a competent professional working in that particular field.

The main qualifying costs that attract relief are;

• Staff costs
• Items that are consumed in the R&D process (e.g. materials, utilities etc)
• Sub-contractor costs
• Any software you employ in the R&D project – the license fees for those will qualify.

What are capital allowances?

• A form of tax relief for capital expenditure on items such as fixtures and fittings, equipment, vans, lorries etc.
• Most businesses can obtain tax relief on up to £200,000 per annum of capital expenditure. For a company that fully utilises that allowance every year they will benefit from a year one up front tax saving of £38,000 based on the current corporation tax rate of 19%.

Ginni and David also discuss whether large companies can claim under the scheme as well as SMEs and what is available in terms of capital allowances for those businesses that are spending more than £200,000 p.a.