Opportunities for Research & Development

A favourable tax backdrop means that this could be a golden time to bring investment plans to fruition, according to our Manufacturing sector partner Iain Black.

Reduction in corporation tax rates to 17% from April 2020, an increased Annual Investment Allowance (AIA) to £1m until December 2020, and the improved availability of cash from the banks, all provide a healthy environment for manufacturing and engineering companies to make significant business investment.

However, a survey undertaken by MHA, a UK-wide association of independent accountancy firms of which Monahans is a partner, suggests that the sector is not taking full advantage of the tax relief available, with almost 30% of businesses making no claim at all.

Iain Black, comments: “It is difficult to ignore the uncertainty of Brexit, but the positive climate for making bold investment decisions is hard to deny. As a firm, we are seeing an increase in manufacturing businesses making R&D claims. With additional cash resources, investment can be made to expand existing manufacturing capacity, improve operational productivity through technology and grasping the digital world, or capture new market opportunities.”

From 1^st January 2019, the Annual Investment Allowance increased from £200,000 up to £1m. This increase remains in place until 31^stDecember 2020, giving businesses two years of the increased limit, after which the allowance will transition back to the original level. Corporation tax will be reduced from 19% to 17% next Spring.

Iain continues: “Clearly the route taken by any business should be well thought through, but for those who are focusing on new market opportunities or perhaps improving productivity, future changes in corporation tax rates and existing R&D tax credits may provide the valuable cash resources needed to bring investment plans to fruition.”