PwC are encouraging North East manufacturers to reconsider R&D tax relief schemes, and prepare to take full credit for sustained investment in innovation.
From April 2013, the Government is introducing a new “above the line” R&D tax credit, which will available to firms with more than 500 employees, irrespective of whether they are making a profit or a loss.
The proposals are currently the subject of a wider consultation, and businesses are being called upon to offer their views by 29 June 2012.
Lynsey Fothergill, R&D tax expert at PwC in the North East, said: “Larger firms in the region are big spenders when it comes to R&D and they deserve to be able to take the credit for their investment.
“From April next year, it is proposed that even if they are making a loss they will be able to claim a repayable tax credit calculated by placing the sum invested in R&D above the line.
“For tax purposes, this means their R&D spend can increase the company’s profits before tax.”
Businesses which have been used to making a loss despite investing in new technologies which have yet to come to market may have never previously claimed R&D tax relief, so indications that they will soon be able to claim repayable tax credits will be welcomed.
She continued: “For those investing large sums in R&D each year, the tax credit repaid to the business could be significant and this is likely to encourage some engineering teams to consider claiming R&D tax relief for the first time.”
Small and medium businesses are also set to benefit from the changes, and can now benefit from tax relief of 125% on their R&D spend. Limits imposed on the level of relief payable based on the company’s PAYE/NI contributions has been removed altogether.
Lynsey added: “Small and medium-sized companies are already able to claim R&D tax relief in the form of a credit even if there are making a loss, but now this is not dependent on how much PAYE/NIC they pay.
“This is good news for smaller, knowledge-based businesses that typically have a lower headcount but still invest significant sums in R&D. These businesses are creating jobs for the future and can now literally take full credit for their investment.”